What I’ve Been Reading

by  Tyler Cowen in

1. Government and the American Economy: A New History, no editor but the book is dedicated to Bob Higgs by Price Fishback.  Imagine essays by economic history luminaries, mostly classical liberals, covering many different eras of American economic history.  For some this is a gold mine.

2. The Third Domain, by Tim Friend.  An overview of archaea, those odd life forms that survive where nothing else can.  A fascinating look at a still mysterious topic.  It’s not as well written as the top-drawer popular science books but since you probably know little or nothing about the topic the amount you will learn is high.

3. Empires of Trust: How Rome Built — and America is Building — a New World, by Thomas F. Madden.  This book is avowed pro-Roman, pro-American, and sees strong parallels across the two regimes; part of the thesis is that neither wanted to build an empire but had to.

4. The Power Makers: Steam, Electricity, and the Men Who Invented Modern America, by Maury Klein.  This is a big, clunky book with lots of poor exposition.  It also covers a vital era — the real Industrial Revolution — which has remained oddly neglected by too many economic historians.

5. The Race Between Education and Technology, by Claudia Goldin and Lawrence Katz.  This is the most important book on modern U.S. inequality to date; here is my previous coverage of their ideas.  I’m still waiting for Paul Krugman to write a critique but right now their core hypothesis is looking strong.

Detroit fact of the day

by  Tyler Cowen in

Among cities with more than 500,000 residents, Detroit has the
safest drivers, with accident rates that are 20 percent below the
national average.

For cities with more than 1 million residents, Phoenix has the
safest big-city commuters, with accident rates about equal to the
national average.

Here is much more, Philadelphia is a disaster and L.A. isn’t so safe either.  I wonder to what extent these rankings simply proxy for traffic density.  Here are some charts.  Overall Sioux Falls, Tucson, and El Paso seem to be relatively safe cities for driving.

Why Not?

by  Tyler Cowen in

I was just invited to a conference — a very good one in fact — where the price of registration rises by $150 for every week that passes.  This encapsulates at least two principles of behavioral economics.  First, it combats our natural tendency to procrastinate.  Second, if you register early you feel you have won a bargain when in fact it still costs something.  This is of course also a planning externality if they know the number and nature of attendees sooner rather than later.

Why Chinese pollution is such a tough problem

by  Tyler Cowen in

Alex is back, alive and well.  But he still has a raspy voice from sucking in all that air pollution.  Here is one reason why, as explained by Brad Plumer:

China’s central government is well aware that its blackened rivers and
sunless skies are a problem, not just because they’re sparking riots
and social unrest, but because out-of-control environmental degradation
is imperiling the country’s economic growth. Lately, Beijing has issued
a slew of bold–at least on paper–environmental regulations. But the
laws are doing little good because the central government can barely
enforce them in its own provinces. This structural problem will remain
the key to China’s environmental dilemma, and, as countries attempt to
push Beijing toward a cleaner future, they’ll discover that the capital
is the least of their troubles.

The central government has passed some fairly "green" laws but often to little avail:

Beijing is aware of this local lawlessness, but has had little success
handling it. "China used to send in swat teams from the central
government," says Barbara Finamore, who directs the Natural Resources
Defense Council’s (NRDC) China program. "I’ve seen these campaigns
going on for twenty years– they’ll come in, shut down some factories,
and, when they leave, they’ll open up again."

Has “The Long Tail” been refuted?

by  Tyler Cowen in

Prof. [Anita] Elberse looked at data for online video rentals and song
purchases, and discovered that the patterns by which people shop online
are essentially the same as the ones from offline. Not only do hits and
blockbusters remain every bit as important online, but the evidence
suggests that the Web is actually causing their role to grow, not
shrink.

Here is the summary article.  Here is the Elberse paper.  Here is Chris Anderson’s response.  Overall I cannot call this one for Elberse.  If you take a genre as given, the web looks less revolutionary but part of the long tail is the creation of new genres.  We have blogs now, for instance, and we didn’t fifteen years ago, even though blog readership is quite concentrated among the top sites.  Or maybe the "Quickflix rental distribution" isn’t so skewed to the left (the least-rented titles aren’t so popular) but where were Quickflix, Netflix, and other such services fifteen years ago? 

Static estimation by deciles and related measures is often misleading since in part the "long tail" effect is to make the top deciles thicker than before, not necessarily to raise the status of the bottom decile relative to the top.  In his response, Chris Anderson nails this point:

The best example of this is in what she describes as a growing
"concentration" of sales around a relatively small number of
blockbuster titles. In the Rhapsody data, she finds, the top 10% of
titles (out of more than a million in that data sample) accounted for
78% of all plays, and the top 1% account for 32% of all plays. That
sounds pretty concentrated around the head, until you reflect, as she
notes, that "one percent of a million is still 10,000–[…]equal to
the entire music inventory of a typical Wal-Mart store."

Nor does showing that most of the sales are in the top of the distribution refute the claim.  Arguably it is the middle tail which is suffering and the long tail, and the best sellers, are growing in import.  That seems compatible with Anderson’s core thesis.  The long tail hypothesis may be oversold but the data in the Elberse piece don’t really dent it.

Elberse wants to define the Long Tail hypothesis as claiming there is
more money to be made in the niches than in the blockbusters; while I believe you might find a quotation to that effect from Chris Anderson the more
general idea is simply how important the niches are
becoming.  Elberse concedes a lot at one point:

It is undeniable that online commerce has significantly broadened
customers’ access to products of all varieties, including the most
obscure. However, my findings suggest that it would be imprudent for
companies to upend traditional practice and focus on the demand for
obscure products.

You could have rewritten that as "The Long Tail hypothesis is basically true, just don’t sell to the Long Tail alone."  On that we should all be able to agree.

The eleven best foods you aren’t eating

by  Tyler Cowen in

This has already achieved widespread circulation through the NYT, but if you don’t already know, its presented expected value is high.  A good way to eat pumpkin seeds is to fry them with chopped tomatillos and chopped white onions and a few chiles, then Cuisinart the whole thing into a sauce and use it with the meat or vegetable of your choice.  Tuna works well too, noting that a rural Mexican might add pumpkin or squash.  You can serve it with either rice or tortillas.

There are now 29 chess players rated over 2700

by  Tyler Cowen in

Here is the story and list.  Achieving a chess rating of over 2700 is very hard to do.  This is a reflection of either: a) just how much talent and sponsorship the modern world has, or b) just how narrowly restricted some people’s talents are.  In an age where a socially non-adept person still can earn good money in hi-tech, I lean more toward a) than b).  The boom in womens’ chess — not generally foreseen twenty years ago — I find especially puzzling and it’s not all driven by the Chinese government wanting to win medals.

Will sanctions on the paper trade stop Zimbabwe?

by  Tyler Cowen in

When all else fails, try to cut off the revenue source:

The Munich-based company that has supplied Zimbabwe with the
special blank sheets to print its increasingly worthless dollar caved
in to pressure on Tuesday from the German government for it to stop
doing business with the African ruler.

Mr. Mugabe’s regime
relies on a steady supply of the paper — fortified with watermarks and
other antiforgery features — to print the bank notes that allow it to
pay the soldiers and other loyalists…

Here is the story.  And in case you are wondering, it’s the same company that printed up the bills for the famous Weimar hyperinflation of the 1920s.  In fact only a few companies in the world can make so much "quality" money in such quantities so quickly.  When in doubt, go with experience!  They’ve been airlifting the bills to Zimbabwe in huge quantities; by the way their motto is "Creating Confidence."  Not as good as "Always Low Prices" if you ask me.

The deeper question is why any tyrannical government would find such a high inflation rate to be seigniorage-maximizing.  At some point people simply abandon the currency or prices end up rising as fast or faster than the government spends the newly printed money.  (Related query: When the number "quadrillion" is in play, are the "anti-forgery" features of the paper really needed?  Isn’t the value of the bill higher as paper in any case?)  Under one hypothesis, the time horizon is very short and the mass printing of bills maximizes seigniorage on a week-to-week basis but not overall.  Under another hypothesis, seigniorage is declining (given price expectations), but without the stream of new bills it would be declining even more rapidly.  I know who to ask.

Medieval cities: Europe vs. the Arabic world

by  Tyler Cowen in

Cities in the Arab world were on average much larger than those in
Europe, and the size of the “primate” city – the megapolis such as
Baghdad, Damascus, Cairo or Istanbul – was much bigger; a fact that is
indicative of a predatory state and low trade openness.
Europe, on the other hand, developed a very dense urban system, with
relatively small principle cities. Big cities in Europe were quite
often located near the sea, being able to optimally profit from
long-distance trade, whereas the largest cities in the Arab world were
almost all inland.

The sociologist Max Weber introduced a distinction between ‘consumer
cities’ and ‘producer cities’. Using this classification, Arab cities
were – much more than their European counterparts – consumer cities.

The classical consumer city is a centre of government and military
protection or occupation, which supplies services – administration,
protection – in return for taxes, land rent and non-market
transactions. Such cities are intimately linked to the state in which
they are embedded. The flowering of the state and the expansion of its
territory and population tend to produce urban growth, in particular
that of the capital city.

In Europe cities are instead much closer to being producer cities.
The primary basis of the producer city is the production and exchange
of goods and commercial services with the city’s hinterland and other
cities. The links that such cities have with the state are typically
much weaker since the cities have their own economic bases. It is this
aspect that accounts for the fact that Arab cities suffered heavily
with the breakdown of the Abbasid Empire, while European cities
continued to flourish despite political turmoil.

Between 1000 and 1300 Europe acquired an urban system dominated by
typical producer cities, which prospered in spite of Europe’s political
fragmentation. In fact, this fragmentation was strongly enhanced by the
rise of independent communes – city-states, or cities with a large
degree of local authority – which form the core of the political system
of Europe’s urban belt stretching from Northern Italy to the Low
Countries. Indeed, we still find this pattern in the so-called ‘Hot
Banana’ – the industrial agglomeration that stretches from the southern
UK to the Netherlands, through Germany and down to northern Italy.

Here is the full article.

China markets in everything fact of the day

by  Tyler Cowen in

A Chinese man who set up an online business selling dead mosquitoes says he’s received 10,000 orders in just two days.

Nin Nan, of Shanghai, came up with the idea of selling mosquitoes he killed to attract visitors to his online jewellery shop.

"I locked myself in the room, thinking hard of a promotion plan. With a ‘pa’ sound and a dead mosquito, I came up with this weird idea," he told Qianlong News.

Nin sells his mosquito corpses for six yuan – about 45p – each. His ad reads: "Truly killed by human hands. Can be used for science studies, decoration, and collection."

Here is the story, and thanks to Allison for the pointer.

Which books to take to Africa?

by  Tyler Cowen in

Niall writes me:

I have an optimization problem that I thought you and other loyal MR
readers, like myself, could help me with.

The Question: How should I go about selecting books to bring with me for
a year of field research in rural Africa?

Conditions:
1. I have a limited amount of weight I can carry on the flight
2. There is little or no access to additional books where I will be
3. I only expect to return to the US once during that year

Thanks for continuing the to make MR the most educational blog on the web.

Sadly I do not know this fine gentleman.  But I’ll suggest the following five books: Moby Dick, The Bible (but it must be a serious translation), Plato’s Dialogues, Homer’s Odyssey, and a long, fun book of science fiction or fantasy that you haven’t already read.  LOTR would be a fine first choice if it fits that bill, otherwise ask around.  The basic principles are that the works should be long, deep, divisible into smaller parts, capable of sustaining rereadings, culturally central in some way, and last of all you need one piece of pure fun.  Readers, can you improve upon these tips?

I’ll add that if you read some language other than English, and thus read more slowly in that language, pick a book or two there as well.