The political culture that is China

News from the Middle Kingdom seems to be coming out systematically worse than what you might have been expecting, at least these days.  Here is an update on censorship and content control:

The platform has been designed with a built-in “Xi Study Points” system (学习积分系统) that allows users to accumulate points on the basis of habitual use of the platform, from reading and viewing of content to the posting of comments and other forms of engagement. It has been widely promoted by local governments and ministries and departments across China, and there have also been reports that some work units have ordered employees to attain specified point levels, with disciplinary measures to be imposed for those who fail to comply…

The app defines several periods of activity as “lively intervals,” or huoyue shiduan (活跃时段), during which users engaging with the platform can earn double points — 0.2 for each article or video, 2 points for a full 30 minutes of use, and so on. The intervals are Monday through Friday from 8:30 PM to 10 PM, and on Saturdays and Sundays from 9:30 AM to 10:30 AM, and 3:30 PM to 4:30 PM. The system, then, incentivises Party members, once home from the office and done with family dinner, to spend golden hours of otherwise discretionary personal time engaging with “Xi Jinping Thought.”

Interesting and frightening throughout, via Comrade Balding.

Why should blackmail be illegal?

David Henderson raises this question in a recent blog post, and here is Robin Hanson from 2011.  I would suggest a few reasons why blackmail should be against the law in traditional ways:

1. The law serves a primary purpose of publicity, and advertising for a polity, and also the law serves symbolic functions.  People still don’t give Singapore a break for making chewing gum illegal and the like, even though this restriction is not in fact a big source of tyranny there.  I don’t see it as good for the United States and its reputation to make blackmail legal, even if the “legalize blackmail” arguments are perfectly sound in a Steve Landsburg kind of way.  It’s just not worth the bad publicity.

2. As Coase pointed out long ago, blackmail typically involves an exchange setting with bilateral monopoly.  And the material in question is often emotionally fraught, such as knowledge of a crime, of an affair, photos of private body parts, and so on.  The process of the trading is painful and stressful for many people.  Limiting that process could produce welfare gains, or at the very least legalizing that process, and thus producing more of it, won’t involve huge benefits.  When the process of trade and bargaining is itself painful, some of the welfare theorems need to be rethought a bit.  Of course the unilateral release of gossip can be terrible too, but perhaps it involves less potential for drawn-out situations and painful bargaining because the transacting it not allowed in the first place.

3. As Scott Sumner points out: “In practice, I suspect that most blackmail involves issues of sex, gender and drugs. (Soon we’ll have to add race to this list.) I don’t expect to convince others of my views here, but let me just say that I believe that our society is unable to think rationally in these areas. Thus I don’t see any great value in legalizing blackmail.”

4. Sometimes the efficient blackmailers are your immediate family, not strangers.  Outlawing blackmail from outsiders gives them a semi-monopoly for an efficient, do-it-yourself at home, low transactions cost Coasean deal (“Darling, someone needs to take out the garbage…”).  Let’s do blackmail right!  And privately, out of the public eye, to avoid the problems discussed under #1.  And as a matter of justice, shouldn’t it be the aggrieved spouse getting the gains here, not the National Enquirer?

Lint Barrage on climate change and capital taxation

I show that decentralizing the optimal allocation requires not only high carbon prices but also fundamental changes to tax policy: If the government discounts the future less than households, implementing the optimal allocation requires an effective capital income subsidy (a negative intertemporal wedge), and, in a setting with distortionary taxation, an effective labor-consumption tax wedge that is decreasing over time. Second, if the government cannot subsidize capital income, the constrained-optimal carbon tax may be up to 50% below the present value of marginal damages (the social cost of carbon) due to the general equilibrium effects of climate policy on household savings. Third, given the choice to optimize either carbon, capital, or labor income taxes, the socially discounting planner’s welfare ranking is ambiguous over a standard range of parameters. Overall, in general equilibrium, a policy-maker’s choice to adopt differential social discounting may thus overturn conventional recommendations for both environmental and fiscal policy.

That is from her discount rate paper.  The broader lesson here is that all your intuitions about climate change, discount rates, and taxes might not hang together.  Do not follow mood affiliation, rather think the issues through carefully.

For the pointer I thank the excellent KL.  Here are other papers by Lint Barrage.

Words of wisdom

Amazon will pay property tax on its new Long Island City offices. It will pay corporate tax — not just on its profits, but on its capital base. Its employees, especially highly paid ones, will pay the city’s personal income tax. Those taxes, of course, will be somewhat offset by the incentives that the city has promised the company — up to $2 billion, depending on how many people the company hires and how many facilities it builds. Those incentives were a wasteful way to attract corporate investment. But in the long run, the tax revenue New York City gets from HQ2 will probably far exceed the cost.

That is from Noah Smith at Bloomberg.  The “will” needs to be changed, otherwise right on target…

Economists for Inclusive Prosperity

The co-directors of this new institution are Suresh Naidu, Dani Rodrik, and Gabriel Zucman.  Here is the Twitter announcement.  Here is an 87-pp. eBook introduction, ungated and free, with a short and readable introduction.  Here is a brief excerpt:

This is a time when we need new ideas for policy. We think economists, among other social scientists, have a responsibility to be part of the solution, and that mainstream economics – the kind of economics that is practiced in the leading academic centers of the country – is indispensable for generating useful policy ideas. Much of this work is already being done. In our daily grind as professional economists, we see a lot of policy ideas being discussed in seminar rooms, policy forums, and social media. There is considerable ferment in economics that is often not visible to outsiders. At the same time, the sociology of the profession – career incentives, norms, socialization patterns – often mitigates against adequate engagement with the world of policy, especially on the part of younger academic economists.

Are workers exploited in the Chinese manufacturing sector?

Many news outlets and scholars have expressed concerns that workers have been unfairly exploited by employers in the Chinese manufacturing sector. Economic theory suggests that this exploitation, if it exists, is the result of employers in the manufacturing sector having considerable monopsony power. While there is a vast economic literature on monopsony power in the United States and other nations, little monopsony research has been conducted on the Chinese manufacturing market. This paper follows the monopsony research tradition and examines the Chinese manufacturing sector along several likely indicators of monopsony power. These include the turnover rate in the manufacturing sector, the relation between marginal factor cost and average factor cost, the relation between average real labor productivity and real wage in the manufacturing sector, and the comparison of labor costs between China and other countries. This study found that worker exploitation/monopsony in the manufacturing sector is not as severe as previously reported.

Here is the paper, by Linan Peng and Joshua Ingber, both of GMU, via the excellent Kevin Lewis.

Amazon winners and losers

WINNERS:

Virginia Governor Ralph Northam: He did a good job on the first Amazon deal for Virginia, and now can try to lure more of the company here.  There is a new reason to keep him in office and also to start paying attention to a different issue.

Nashville and the Southeast more generally: That part of the country has fewer local NIMBY activists and is less likely to elect figures such as AOC.  Texas too.  Is it possible that I live in the sanest part of the country?  Wouldn’t that be funny?

The Bay Area: NYC is no longer such a fierce competitor at the macro level, with the potential to become the new center of gravity for the tech world.  The Bay Area can breathe a bit more easily now, at least as long as clustering remains the name of the game.  Yet this one is double-edged, because it also means the Bay Area has less incentive to solve its rather pressing problems and dysfunctions.

Valentine’s Day: It will be used to announce more dramatic break-up events, and thus become all the more emotionally fraught, in both positive and negative directions.

Hoboken and Jersey City: They are nicer than Manhattan anyway and with better day-to-day food options, right?  Right?  Queens won’t be obviously outcompeting them as a home for a new, high-quality business site.

Regional development subsidies: It was awfully easy for Amazon to walk away from this “deal.”  Expect to see higher subsidies and tighter deals in the future.

LOSERS:

Queens: Most of the residents wanted the project to come.

Amazon: The company will find it harder to access the top talent of New York City, and the top talent that is willing to live in New York City.  Let’s hope this is a blessing in disguise, and a new path toward discovering hitherto untapped sources of talent.

New York City: Yes, Google is expanding in Chelsea but more and more NYC is becoming a city of finance and tourism and restaurants.  Can a location have the Dutch disease and cost disease at the same time?  Stay tuned to find out.

YIMBYs: One of the world’s most valuable, efficient, and also popular companies could not make stick a deal to expand and create tens of thousands of high-paying jobs and pay more taxes.  What hope do the rest of us have?

Small teams vs. large teams in science

Here we analyse more than 65 million papers, patents and software products that span the period 1954–2014, and demonstrate that across this period smaller teams have tended to disrupt science and technology with new ideas and opportunities, whereas larger teams have tended to develop existing ones.

That is from a new Nature paper by Lingfei Wu, Dashun Wang, and James A. Evans.  Here is the NYT write-up by Benedict Carey.

Thursday assorted links

1. Knowable Magazine.

2. Refugees in Denmark do much better in Copenhagen.

3. Carbon capture update (NYT, good piece).

4. Is Africa converting China?

5. “Royalties on 1983 Finance Classic ‘Trading Places’ Go Up for Bid.”  “If it holds until the auction closes Wednesday, the current winning bid of $74,700 would obtain a producer’s share of the residuals generated by television rebroadcasts and streaming, worth $7,988 last year(…)”

6. Dylan Matthews of Vox praises Warren G. Harding.

Seven lessons about blackmail

That is the title of my latest Bloomberg column, here is the opening bit:

Every now and then, a few apparently random news events come together and influence how you see the world. My most recent lesson is that blackmail and blackmail risk are a lot more common than I had thought.

And:

…the main villains in these privacy losses are not the big internet companies. While it is murky exactly how the Bezos photos leaked, it seems to have involved old-fashioned spying and the interception of text messages (and possibly a renegade brother). Silicon Valley didn’t sell his data. As for Northam, the yearbook is from the pre-digital era, dug up in a school library. This information was not on the internet, though of course it did play a role in spreading it.

Third, billionaires can be pretty useful. As Bezos asked in his open letter on Medium: “If in my position I can’t stand up to this kind of extortion, how many people can?” In this case, both the billionaire and the medium of communication are the good guys.

Fourth, fears of a new era of blackmail based on Photoshopped images and so-called deep fakes (phony but convincing video) may be overblown, or at least premature. In the cases of both Bezos and Northam, the authenticity of the source material (text messages and photos) is not really being questioned, and both stories are receiving intense scrutiny. Rather, the debate is over the provenance and significance of the information.

There is much more at the link.

Wednesday assorted links

My Conversation with Jordan Peterson

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

Jordan Peterson joins Tyler to discuss collecting Soviet propaganda, why he’s so drawn to Jung, what the Exodus story can teach us about current events, his marriage and fame, what the Intellectual Dark Web gets wrong, immigration in America and Canada, his tendency towards depression, Tinder’s revolutionary nature, the lessons from The Lord of the Rings and Harry Potter, fixing universities, the skills needed to become a good educator, and much more.

Here is one bit:

COWEN: Your peers in the Intellectual Dark Web — the best of them — what is it they’re wrong about?

PETERSON: Oh, they’re wrong about all sorts of things. But at least they’re wrong in all sorts of interesting ways. I think Sam Harris, for example — I don’t think that he understands. I don’t think that he’s given sufficient credence to the role that religious thinking plays in human cognition.

I think that’s a huge mistake for someone who’s an evolutionary biologist because human religious thinking is a human universal. It’s built into our biology. It’s there for a reason. Although Sam is an evolutionary biologist, at least in principle, with regards to his thinking, he’s an Enlightenment rationalist when it comes to discussing the biology of religion, and that’s not acceptable.

It’s the wrong time frame. You don’t criticize religious thinking over a time frame of 200 years. You think about religious thinking over a time frame of 50,000 years, but probably over a far greater time span than that.

COWEN: So if that’s what Sam Harris doesn’t get —

PETERSON: Yeah.

COWEN: If we turn to senior management of large American companies, as a class of people — and I know it’s hard to generalize — but what do you see them as just not getting?

PETERSON: I would caution them not to underestimate the danger of their human resources departments.

Much more than just the usual, including a long segment at the end on Jordan’s plans for higher education, here is one bit from that:

Universities give people a chance to contend with the great thought of the past — that would be the educational element. To find mentors, to become disciplined, to work towards a single goal. And almost none of that has to do with content provision. Because you might think, how do you duplicate a university online? Well, you take lectures and you put them online, and you deliver multiple-choice questions. It’s like, yeah, but that’s one-fiftieth of what a university is doing.

So we’ve just scrapped that idea, and what we’re trying to do instead is to figure out, how can you teach people to write in a manner that’s scalable? That’s a big problem because teaching people to write is very, very difficult, and it’s very labor intensive and expensive. So that’s one problem we’d really like to crack. How can you teach people to speak? And can you do that in a scalable manner as well?

Definitely recommended, even if you feel you’ve already heard or read a lot of Jordan Peterson.

Life without the Export-Import Bank

In terms of total revenue, Boeing, the aerospace giant, had its best year ever in 2018, with worldwide sales of $101.1 billion.

Exports were particularly robust. Commercial jet deliveries to foreign airlines rose from 763 in 2017 to 806 last year. Overall, the company has a 5,900-order backlog for airplanes worth a staggering $412 billion, according to The Post last week…

For the past 3½ years, Ex-Im, as the trade-finance agency is known, has been essentially paralyzed, yet Boeing has gone from strength to strength…

In the end, Ex-Im survived, as a legal entity. Crucially, though, Senate Republican foes of the bank refused to confirm a quorum for the bank’s board; without a quorum, Ex-Im cannot approve loan transactions larger than $10 million.

As a result of this ploy, the bank has been unable to aid foreign sales of Boeing or other makers of big-ticket goods since June 2015.

And yet, in that time, Boeing has done awesomely well.

It’s not just Boeing that has survived or thrived during Ex-Im’s paralysis. Another company that received heavy Ex-Im support, construction-equipment-maker Caterpillar, achieved a record profit per share in 2018. Caterpillar’s outlook for 2019 is somewhat less rosy, due to broad economic factors such as the slowdown in China, but Ex-Im, or the lack thereof, hardly registers in analyst forecasts.

Here is more from Charles Lane.

What does a Twitter-driven politics look like?

That is the topic of my latest Bloomberg column, here is the final bit:

But what does this new, more intense celebrity culture mean for actual outcomes? The more power and influence that individual communicators wield over public opinion, the harder it will be for a sitting president to get things done. (The best option, see above, will be to make your case and engage your adversaries on social media.) The harder it will be for an aspirant party to put forward a coherent, predictable and actionable political program.

Finally, the issues that are easier to express on social media will become the more important ones. Technocratic dreams will fade, and fiery rhetoric and identity politics will rule the day. And if you think this is the political world we’re already living in, rest assured: It’s just barely gotten started.