Insourcing: the current trend

Michael Walden writes:

While outsourcing has captured current attention, it is not a new phenomenon. If the term is defined as jobs operated by U.S. companies in foreign countries, the current total is 10 million positions, or 7 percent of domestic U.S. employment. Further, there’s been an upward trend in the number of outsourced jobs since the mid-1990s, when trade barriers were significantly reduced following the signing of the NAFTA and GATT agreements.

What is less well publicized and understood is that “insourcing” also occurs in our economy. Insourcing happens when foreign companies establish jobs in the United States.

The latest statistics show insourcing accounts for over 6.5 million jobs nationwide. Although this is less than the number of outsourced jobs, the gap has actually narrowed in the past quarter century. That is, there’s been a recent trend of foreign companies adding jobs in the U.S. faster than U.S companies have increased jobs in foreign countries….

The scorecard on job outsourcing versus job insourcing has actually moved in the favor of the U.S. in recent decades, and policy-makers must consider both when evaluating the worldwide movement of jobs.

Thanks to Daniel Drezner for the link, read his accompanying discussion of the Europeans are dealing with outsourcing.

If pigs had wings

The Disney board just turned down the current Comcast offer. Of course Comcast is free to come back with better terms. The first bid was considered no more than an opening salvo in a longer bidding battle. Disney already has hinted it would consider a better offer.

Now if a better Comcast offer for Disney made sense, what would this imply?

1. It would mean that cable operators are correct in wishing for an earlier release of films to television. DVD releases would end up speeded up as well. Moviegoing would become more of a social event, rather than the only means of seeing a given film. Date movies and large screen spectaculars probably would become more popular in the theater, as they would offer a more unique product. Moviegoing as a whole might well decline in popularity. Large-screen televisions would increase in appeal.

The big gainers would be the cable companies, who would capture a share of the revenue currently going to DVDs. The big losers would be Hollywood and, to a lesser extent, companies such as Wal-Mart and Best Buy, which sell large numbers of low-priced DVDs (they would make back some money on TV sales). In part the offer is an attempt to yank DVD revenue away from movie producers and put it in the hands of a company that pipes movies into your home. The age of video on demand would finally arrive, Comcast is known for its strong promotion of this concept.

2. A takeover would signal a final end to the privileged position of the major networks. Don’t forget that Disney owns ABC, so the biggest cable company would now own a major network. Network programming would end up driven by the demands of cable television. Cable and satellite TV already account for the bulk of American viewing; only 14 percent of the American viewing public does not have either cable or satellite TV. In addition local news would continue to decline in importance and TV will become racier, given the looser role of the FCC in supervising cable content.

3. A takeover would later be seen as a turning point for the convergence of all media with the Internet. Cable supplies most of the bandwidth, and the ascendancy of cable companies will enable your TV, Internet connection, and other electronic devices to talk to each other. With a cable company leading the charge, and controlling and owning the relevant content, it could more easily internalize these benefits and charge you for the integration.

But reread the first word of the title of this post, “If.” Here is Rudyard Kipling’s poem If.

Can’t all this happen without Comcast buying Disney? If these outcomes are value-maximizing won’t arms-length transacting get us to the same place? You can bet on this question with a phone call to your broker. But before making your bet, read about this attempt to use stem cell technologies to grow pig wings.

Should you buy Latin American art?

A recent study by Sebastian Edwards suggests that Latin American art, in the latter quarter of the twentieth century, brought supra-normal returns with low risk relative to the market portfolio. Under one measure, the mean annual return was a solid nine percent. Here is the abstract:

In this paper I use a large data set to analyze two aspects of the Latin American arts: (1) the nature of artistic creative process, and (2) Latin American art as an investment. I use data on auctions to understand the relation between artists’ age and the value of their work. The analysis on creativity suggests that Latin American artists have followed very different patterns from that followed by U.S. artists. There is strong evidence suggesting that American artists born after 1920 did their best work at an earlier age than their older colleagues; exactly the opposite is true for the case of Latin America. Indeed, the results reported in this paper suggest that Latin American artists born after 1920 did their best work at a significantly older age than their colleagues from earlier cohorts. The analysis of art as an investment is based on the estimation of hedonic price indexes, and indicates that Latin American art has had a relatively high rate of return indeed much higher than that of other type of paintings. The results also indicate that returns on Latin American art have a very low degree of correlation that is, a very low beta relative to an international portfolio comprised of equities. This means that adding Latin American art will lower the overall risk of an international portfolio.

How can this be?: Most national art markets are driven by collectors from that country or region. The high investment returns on Latin painters suggest that the wealth of the wealthy, in Latin America, grew faster than expected for several decades. At the same time, some Latin painters, such as Frida Kahlo, attracted sudden and unexpected interest from North American buyers. So two particular idiosyncratic factors drove these superior returns. Mexican art is a great avocation of mine, but I cannot recommend it as a means of reducing your future portfolio risk. Buy what you love, and consider it consumption expenditure.

Cell phone numbers for sale

“The New phone number rules that allow you to keep your phone number when you switch carriers has given rise to phone nascent number property rights. On E-bay you can bid on 867-5309 (made famous by Tommy Tutone’s Jenny I got your number). As I write this the bid is over $8000 dollars with seven days to go. What other numbers are famous or valuable? Will we see a land rush like the internet names?”

From Slashdot, thanks to Noah Yetter for the pointer. And when I checked, the bid for the number was up to $56,000. Here are some classified ads selling cell numbers. I’d like CTA-102 in my number, $50 to anyone who can deliver it.

Questions of the day

You say the rich do not pay enough taxes. In 1979 the top 1 percent of earners paid 19.75 percent of income taxes. Today they pay 36.3 percent. How much is enough?

From George Will’s excellent “The 1st 28 Questions for Kerry.” The entire article makes for compelling reading.

How about this one?

You say the federal government is not spending enough on education. President Bush has increased education spending 48 percent. How much is enough?

These questions are an object lesson in the virtues of divided government.

Addendum: For the tax data, here is a relevant link, thanks to Paul Barriere.

Progressive speeding fines?

One of Finland’s richest men has been fined a record 170,000 Euros ($217,000) for speeding through the center of the capital, police said.

Jussi Salonoja, 27, heir to his family’s sausage business, was caught driving 50 mph in a 25 mph zone last week.

Finnish traffic fines are pegged to the offender’s income. According to tax data, Salonoja’s 2002 earnings were close to 7 million Euros.

Imagine that kind of system here. It could be scaled way down, say $3,000 for a rich person, $300 for a middle-income person and $30 for a poor person for each violation involving speeding, running a red light, blocking an intersection, ignoring a crosswalk or parking illegally in a curb lane during rush hour. Think that might bring any more compliance and downtown gridlock relief?

As reported by Dr. Gridlock, who writes for The Washington Post on traffic problems.

Legality and constitutionality surely do not favor this idea in the U.S., but how about efficiency? I say no. Richer individuals on average have higher valuations of time. If a billionaire wants to park illegally, there is some chance he is in the process of cutting a big deal. Don’t levy a special fine on him. “Rich people speeding” is not a crisis in need of a particular solution, general reductions in the speeding rate will do, which suggests upping a general fine for speeding. Equal dollar fines are consistent with the rule of law, and progressive fines would give the cops a special incentive to go after Bill Gates. Gates in turn would have special incentive to hire a chauffeur. True, efficiency is unlikely to suggest strictly equal dollar fines, but if the choice is equal dollar fines or discretion I will prefer the former.

The strangeness that is our universe

Over the weekend I’ve been gobbling up Brian Greene’s The Fabric of the Cosmos. I still don’t understand strings, branes, and how the known universe might be a projected hologram, but this book gets me further than any of the other popular science treatments I know. The author favors string theory and the idea of extra, hidden dimensions. He also discusses how we are on the verge of testing some of these exotic ideas. Recommended, especially if you find these ideas intriguing but have a hard time grasping them in intuitive terms.

A cinematic renaissance

Two years ago, every one of Phnom Penh’s 33 cinemas lay disused. In the 1960s, Cambodian-made films were famous across Asia, and movie-going was a national obsession. But cinema culture was one of the many victims of the genocidal Khmer Rouge of 1975-79 and the two decades of civil war and Vietnamese occupation that followed.

N.B.: Hollywood is not the only reason why cinema is struggling in many locales.

Today, however, Phnom Penh is in the midst of a cinematic boom. Theaters are opening or reopening across the country. The last eighteen months have brought nine new cinemas. A ticket costs about a dollar, the same as per capita daily income.

And what is the most popular genre, by far? Horror films.

The quotation is from “Phnom Penh’s New Rage,” The Financial Times, Saturday, February 14. Here is an account from The Cambodian Times.

Cambodia, of course, provided one of the more extreme examples of government support for the arts. Prince Sihanouk produced, directed, and wrote the musical scores for twenty-eight movies. He was often scriptwriter and star as well. So if the print says “Director’s Cut,” I’m sure they mean it.

Haiti, continued…

Remember the Haitian embargo? One group of bad guys took over from another group of bad guys (i.e., Aristide and his cronies), so we stopped trading with them?

Georgie Anne Geyer offered some apt words on why this embargo was a disaster:

The economic part of the Haitian disaster was laid down in 1991, all with the best of intentions…The U.S. and other countries had imposed a severe embargo upon Haiti. This had the not-unexpected effect of (1) turning the military to smuggling, their first love anyway, and (2) utterly and tragically destroying the small businesses of Haiti.
“In the 1980s, we were planting up to 10 million trees a year in reforestation,” the ambassador to Haiti in that era, Ernest Preeg, reminisced sadly with me this week. “We had an anti-malaria program, secondary road programs and a brand-new container port. Haiti made textiles, footwear, toys, and baseballs. Three years of the embargo destroyed all the job-creating programs, and then Aristide destroyed the rest. After that, most of the aid went strictly to ‘democracy projects.’ In short, we took everything away from the long-term; we sacrificed the long-term for the short.”

Colin Powell has pledged, albeit in ambiguous words, that the U.S. will not intervene in the current collapse of order. Observers speculate that the prospect of Haitian refugees, mostly arriving in the electoral swing state of Florida, may change this calculus.

My view: The U.S. government built some valuable roads for Haiti in the 1920s, during our failed nation-building episode there. Otherwise our government has done many things to harm the Haitians, and few things to help. I’m all for greater free trade, but we are past the point where this would be very useful. Here is a previous post on Haiti, here is another.

The family as a source of inequality

Forthcoming research suggests that the family is a significant source of inequality:

differences between families explain only 25 percent of the nation’s income inequality; the remaining 75 percent is explained by differences between siblings. More typical of the United States than President Bush and his brother Jeb, the governor of Florida, he suggests, are the White House’s previous tenant, Bill Clinton, and his half-brother, Roger, a college dropout, onetime cocaine dealer and failed musician. Or, for that matter, Jimmy Carter and his ne’er-do-well brother, Billy (emphasis added).

So what in the family matters? It is not birth order, here the analysis become quite intricate:

…his conclusions – that everything from parental job loss or divorce to race and family size can affect siblings differently – don’t lend themselves to catchy headlines, they arguably provide a more nuanced portrait of internal family dynamics than all-purpose explanations like birth order.

Some of his more provocative findings concern middle-borns. In families with three or more children, Mr. Conley says, middle offspring are less likely to receive financial support for their education and may do less well in school than their older and younger siblings. The chances that a second child will attend private school drop by 25 percent with the birth of a third, Mr. Conley found, and the likelihood that he or she will be held back a year increased severalfold. Unlike typical first- and last-borns, he reasons, middle children never experience family life as an only child; instead, they are forced to compete with their siblings for money and attention. (In this sense, he concedes, birth order does matter: not as a psychological variable but as a constraint on family resources.)

Other findings seem to confirm common-sense intuitions. According to Mr. Conley’s analysis, for example, women are more likely to be as successful as their brothers if their mothers worked outside the home. And, like the long-suffering George Bailey in “It’s a Wonderful Life,” the oldest child still at home at the time of a parental death or divorce is more likely than younger siblings to endure negative socioeconomic consequences as a result. Brothers and sisters may even experience race differently, he argues, since skin color can vary considerably within the same family.

So far it seems that the work is well-received. Here is the home page of the researcher, Dalton Conley, a remarkably prolific and rigorous scholar. Here is an earlier MR post on Horatio Alger and intergenerational mobility.

The (provisional) bottom line: Unhappy with your lot in life? It’s not the capitalist system or the Bush tax cuts, blame Mom and Dad. I’ll let you know more once the book arrives and I’ve read the whole thing.

How to stay together

What best predicts whether a marriage will last?

The crucial predictors, say the researchers, are the presence of facial expressions that accompany emotions such as contempt. Gottman says that just watching a couple and looking for this expression, described as a sideways pull of a corner of the mouth accompanied by rolling eyes, is enough to make a good guess about a couple’s suitability. “This is our best predictor,” he says. “Contempt is the sulphuric acid of love.”

We are told that the entire model has a 94 percent success rate in predicting divorce.

Here is some positive advice for Valentine’s Day:

Gottman may also have stumbled across the secret of a lasting relationship – simply ignore the nasty comments from your partner. He says that courting couples tend to ignore negative statements and pay more attention to positive remarks. Once married, this trend often reverses, although couples that remain together into their sixties retain this outlook.

How about gay couples?

…gay and lesbian couples, as well as heterosexual couples that do not marry, hold on to the positive value of courtship better than straight partners who get hitched, he says.

For more information, read The Mathematics of Marriage: Dynamic Nonlinear Models. Are they joking with that title?

Can the U.S. government manipulate the real exchange rate for the dollar?

Exchange rates today respond in large part to capital flows–not to the utterances of central bankers and finance ministers. And the vast structural forces affecting those flows–the comparative economic strength of the United States vs. the Eurozone, the insatiable desire by U.S. businesses and consumers for imports–are far beyond the reach of this, or any, administration.

The argument goes through a variety of detailed cases, click here for the full account.

You lie more over the phone

Relative to email, that is. Why? Email leaves a permanent record and you are afraid of getting caught in your lies.

Jeff Hancock of Cornell University in Ithaca, New York, asked 30 students to keep a communications diary for a week. In it they noted the number of conversations or email exchanges they had lasting more than 10 minutes, and confessed to how many lies they told.

Hancock then worked out the number of lies per conversation for each medium. He found that lies made up 14 per cent of emails, 21 per cent of instant messages, 27 per cent of face-to-face interactions and a whopping 37 per cent of phone calls.

That’s a lot of lying. Here is the full story.

No baby, you really ARE beautiful…

Carry a lie detector in your pocket:

The Love Detector is based on layered voice analysis, a system that was developed for security work by Nemesysco, an Israeli company, and adapted for personal use by V Worldwide, the international distributor.

The Love Detector relies on a simplified form of the technology, said Richard Parton, chief executive of V Worldwide. The security version applies 8,000 algorithms to 129 parameters of a speaking voice, assessing, among other things, levels of emotion, embarrassment and concentration as well as whether what is said reflects certainty, uncertainty or outright lies.

When this reporter tried it informally, both in person and over the phone, the results were arguably accurate; the software detected the split in my attention as I took notes, though it misinterpreted my skepticism about the product as condescension.

Buy one here.

Some versions of the new product will put James Bond to shame:

Later this year V plans to introduce a simplified version built into sunglasses, with light-emitting diodes to signal emotional intensity and truth or falsehood.

Here is one article about the product. Here is the whole story. The article notes that many people will use the product to assess their own emotions, not just the person they are trying to court.