How would actual alien spacecraft influence asset prices?

by  Tyler Cowen in

Primarily as an exercise, I thought about that question for a while, and here is part of my answer in a Bloomberg column:

If you know you are being watched, what exactly do you wish to buy more of? I would bet on defense stocks to rise, whether or not there is much we can do to defend ourselves against this alien presence.

Of course investors could not be sure that these alien drone probes will merely observe us forever. They might be observing with the purpose of rendering judgment. If they are offended by our militaristic tendencies, the quality of our TV shows and our inability to adopt the cosmopolitan values of “Star Trek” over the next 30 years, maybe they will zap us into oblivion. But that kind of systematic risk is hard to insure against. After such an act of obliteration, neither gold nor Bitcoin will do you any good.

My main prediction is that alien UFOs will be bullish for the dollar. The U.S. government seems most closely connected to the UFO phenomenon, for whatever reason. (Maybe its pilots fly more sallies and record better data?) In any case, if alien UFOs become more likely, an informational advantage would accrue to the federal government. And the dollar already has a tradition as a safe haven currency…

Most of us would get used to the idea of alien presence without quite believing in it. As The New Yorker makes clear, many Americans believed in alien-origin UFOs after World War II, as did many American policymakers. It might have spurred greater interest in the space program and science fiction, but it didn’t affect most aspects of American life, nor did it seem to drive markets.

Never underestimate the capacity of markets, like humans, to adapt. Just as many of the strangest parts of our lives can come to seem normal, so Wall Street can find a way to do business with just about anybody — aliens included.

I do full, literally mean everything stated in the column.  But the piece also has (at least) two esoteric meanings — can you guess what they are?

Who is the best-known, non-political American married couple?

by  Tyler Cowen in

With Bill and Melinda Gates divorcing, and Kanye and Kim doing the same, America now has a paucity of very well-known married couples, at least outside of politics, where Barack and Michelle Obama reign supreme.

Who is the Lucy and Desi of our time?  The George Burns and Gracie Allen?  The Sonny and Cher?

George and Amal Clooney are in the running, but is she so well known to most Americans?  Could they tell you her name from scratch, or cite what she is known for?

Kurt Cobain has passed away, as has Kobe Bryant, Larry and Laurie David split some time ago, and John and Yoko and Paul and Linda (an honorary American couple, for media purposes) are distant memories.  Movie stars barely still exist these days.

Perhaps Elon Musk will marry Grimes, who is a musical star of some renown.

Woody Allen and Soon-Yi Previn have been married for 24 years, and they are pretty well known.

Harry and Meghan maybe are becoming an American couple, at least for media purposes?

Who else?

The rise of research teams in economics

by  Tyler Cowen in

Solo authorship represented 80 percent of economics papers in 1960 and 65 percent in 1990, but then solo-authorship fell out of the majority in 2005 and represents only 26 percent of economics papers today (as measured by the right-hand axis). To put it another way, in 1950, there were 1.2 authors per economics paper. Average team size reached 2.0 for the first time in 2010. By 2018, team size averaged 2.7 (as shown on the left-hand axis). The jump in average team size in economics papers over the last ten years is greater than the jump over the prior half-century.

Here is more from Benjamin F. Jones.  For higher impact papers, the trend is even more striking.

Concentration in product markets

by  Tyler Cowen in

Here are some new results:

This paper uses new data to reexamine trends in concentration in U.S. markets from 1994 to 2019. The paper’s main contribution is to construct concentration measures that reflect narrowly defined consumption-based product markets, as would be defined in an antitrust setting, while accounting for cross-brand ownership, and to do so over a broad range of consumer goods and services. Our findings differ substantially from well established results using production data. We find that 42.2% of the industries in our sample are “highly concentrated” as defined by the U.S. Horizontal Merger Guidelines, which is much higher than previous results. Also in contrast with the previous literature, we find that product market concentration has been decreasing since 1994. This finding holds at the national level and also when product markets are defined locally in 29 state groups. We find increasing concentration once markets are aggregated to a broader sector level. We argue that these two diverging trends are best explained by a simple theoretical model based on Melitz and Ottaviano (2008), in which the costs of a firm supplying adjacent geographic or product markets falls over time, and efficient firms enter each others’ home product markets.

That is a new NBER working paper by C. Lanier Benkard, Ali Kurukoglu, and Anthony Lee Zhang.  It is very supportive of recent research by Estaben Rossi-Hansberg (here and here, with co-authors) that market concentration simply has not been going up in recent times.

New results on Work From Home

by  Tyler Cowen in

By Jose Maria Barrero, Nicholas Bloom, and Steven J. Davis, there are several points of note, with emphasis added by this author:

COVID-19 drove a mass social experiment in working from home (WFH). We survey more than 30,000 Americans over multiple waves to investigate whether WFH will stick, and why. Our data say that 20 percent of full workdays will be supplied from home after the pandemic ends, compared with just 5 percent before. We develop evidence on five reasons for this large shift: better-than-expected WFH experiences, new investments in physical and human capital that enable WFH, greatly diminished stigma associated with WFH, lingering concerns about crowds and contagion risks, and a pandemic-driven surge in technological innovations that support WFH. We also use our survey data to project three consequences: First, employees will enjoy large benefits from greater remote work, especially those with higher earnings. Second, the shift to WFH will directly reduce spending in major city centers by at least 5-10 percent relative to the pre-pandemic situation. Third, our data on employer plans and the relative productivity of WFH imply a 5 percent productivity boost in the post-pandemic economy due to re-optimized working arrangements. Only one-fifth of this productivity gain will show up in conventional productivity measures, because they do not capture the time savings from less commuting.

Here is the link to the NBER working paper.

Monday assorted links

by  Tyler Cowen

1. Stapp and Dourado criticizing bitcoin.  Better than the usual b.s.

2. Reindeer cyclones.

3. How old are you?  Recommended for all those above a certain age, but which age might that be?  There is only one way to find out.

4. How Pixar uses colors.

5. Johnny Rogan, one of the best biographers, has passed away.

6. “We find that the shutdown of Google News reduces overall news consumption by about 20% for treatment users, and reduces page views on publishers other than Google News by 10%. This decrease is concentrated around small publishers.”  Link here.

What should we regulate *more*?

by  Tyler Cowen in

Since the Biden team does not seem too favorably disposed to deregulation, perhaps it is worth asking in which areas we should be pushing for additional regulation.  Here are a few possible picks, leaving pandemic-related issues aside, noting that I am throwing these ideas out and in each case it will depend greatly on the details:

1. Air pollution.  No need to go through this whole topic again, carbon and otherwise.  Remember the “weird early libertarian days” when all air pollution was considered an act of intolerable aggression?

2. Noise pollution.  There is good evidence of cognitive effects here, but what exactly are we supposed to do?  Can’t opt for NIMBY now can we!?

3. Something around chemicals?  How about more studies at least?

4. Housing production.  You can look at this as more or less regulation depending on your point of view.  But perhaps cities of a certain size should be required by the state government to maintain sufficient affordability.

5. Mandates for standardized reporting of data?  For example, the NIH requires that scientists report various genomic data in standardized ways, and this is a huge positive for science.  What else might work in this regard?

6. Federal occupational licensing, in lieu of state and local.

7. Software as a service from China?

8. Animal welfare and meat production.

9. Is there a useful way to regulate to move toward less antibiotic use?

10. Should we have more regulation of AI that measures human emotions?  How about facial and gait surveillance in public spaces?

11. How about regulating regulation itself?

What else?

I thank an MR reader for some useful suggestions behind this post.

Positive externalities through family member incarceration?

by  Tyler Cowen in

This result surprised me, but perhaps there are gains from getting the bad apples out of the household?:

Every year, millions of Americans experience the incarceration of a family member. Using 30 years of administrative data from Ohio and exploiting differing incarceration propensities of randomly assigned judges, this paper provides the first quasi-experimental estimates of the effects of parental and sibling incarceration in the US. Parental incarceration has beneficial effects on some important outcomes for children, reducing their likelihood of incarceration by 4.9 percentage points and improving their adult neighborhood quality. While estimates on academic performance and teen parenthood are imprecise, we reject large positive or negative effects. Sibling incarceration leads to similar reductions in criminal activity.

That is new from Samuel Norris, Matthew Pecenco, and Jeffrey Weaver, forthcoming in the AER.  Via Ilya Novak.  Here is Noah on this study, here is a related result from Sweden.

Sunday assorted links

by  Tyler Cowen

1. Those new service sector jobs.

2. How much would be collected from a higher capital gains rate?

3. Fairfax County police chief under fire for earlier behavior.

4. “The Pfizer vaccine’s “280 different components, manufactured in 86 different sites across 19 countries, driven partly by the research of Turkish migrants to Germany, is globalization in a needle.””  Link here.

5. Income at the margin for Supreme Court Justices (Bloomberg).  Is this a problem or not?

6. The difficulties of being Australian (Pakistani).

What predicts professional philosophers’ views?

by  Tyler Cowen in

The entire piece is interesting, but this segment caught my eye in particular:

Additionally, they found that being more politically right-leaning was associated with several philosophical views, such as theism, free will libertarianism, nonphysicalist views in philosophy of mind, and the correspondence theory of truth.

Here is more from Justin Weinberg.  Belief in hard determinism, by the way, is correlated with lower levels of happiness.

I say this all boosts Strauss in relative status.  It is important to believe that people really are special and possess agency, no matter what the actual truth.

What I’ve been reading

by  Tyler Cowen in

1. Marcel Proust, The Mysterious Correspondent: New Stories.  Yes they read like fragments, but Proust’s fragments are still better than almost anything else.

2. Michele Alacevich, Albert O. Hirschman: An Intellectual Biography.  There can never be enough books on Albert Hirschman, noting this one focuses on his ideas rather than his life.

3. Jennifer Ackerman, The Bird Way: A New Look at How Birds Talk, Work, Play, Parent, and Think.  A good and entertaining overview of some of the most interesting questions about birds, including bird intelligence.  “Extreme behavior in birds is more likely in Australia than anywhere else.”

4. Paul Betts, Ruin and Renewal: Civilizing Europe After World War II.  The immediate aftermath of WWII was the last time the Western world was truly chaotic, and this book captures that time well, including its intellectual milieu.  Are you interested in how West and East German books of manners differed in the late 1940s and 1950s?  If so, this is your go-to book.

5. Tim Birkhead, The Wisdom of Birds: An Illustrated History of Ornithology.  As I tweeted: “I am coming to the conclusion that the quality of books about birds is higher than about almost any other subject.”  Simple question: have you read a better book about the history of ornithology than this one?

Tom Standage, A Brief History of Motion: From the Wheel, to the Car, to What Comes Next is a very good history of what it promises.

Jonathan Rauch, The Constitution of Knowledge: A Defense of Truth, is indeed…a defense of truth.

There is Niall Ferguson, Doom: The Politics of Catastrophe, lots of bad news yes, but is he short the market?

NFT virtual horse markets in everything

by  Tyler Cowen in

Is it simply that we have made gambling too much fun and too intriguing?  Or should we upgrade our view of the welfare consequences of gambling?:

On Zed Run, a digital horse racing platform, several such events take place every hour, seven days a week. Owners pay modest entry fees — usually between $2 and $15 — to run their steeds against others for prize money.

The horses in these online races are NFTs, or “nonfungible tokens,” meaning they exist only as digital assets….

“A breathing NFT is one that has its own unique DNA,” said Roman Tirone, the head of partnerships at Virtually Human, the Australian studio that created Zed Run. “It can breed, has a bloodline, has a life of its own. It races, it has genes it passes on, and it lives on an algorithm so no two horses are the same.” (Yes, owners can breed their NFT horses in Zed Run’s “stud farm.”)

People — most of them crypto enthusiasts — are rushing to snap up the digital horses, which arrive on Zed Run’s site as limited-edition drops; some of them have fetched higher sums than living steeds. One player sold a stable full of digital racehorses for $252,000. Another got $125,000 for a single racehorse. So far, more than 11,000 digital horses have been sold on the platform.

Alex Taub, a tech start-up founder in Miami, has purchased 48 of them. “Most NFTs, you buy them and sell them, and that’s how you make money,” Mr. Taub, 33, said. “With Zed, you can earn money on your NFT by racing or breeding.”

One implication here is that automation is never going to destroy all of the jobs.  Here is the full NYT story.