Mary C. Daly understands the median voter theorem
Ms. Daly…has shifted her tone particularly dramatically in recent weeks…
As recently as mid-November, she had argued that the Fed should be patient in removing its support, avoiding an overreaction to inflation that might prove temporary and risk unnecessarily slowing the recovery of the labor market. But incoming data have confirmed that employers are still struggling to hire even as consumer prices are rising at the fastest clip in nearly 40 years. Rising rents and tangled supply chains could continue to push up inflation. And she’s running into more people like that woman in Walgreens.
“My community members are telling me they’re worried about inflation,” Ms. Daly said last week.
Here is the NYT story, and note she is not the most right-leaning member of the FOMC. This, in a nutshell, is why I think inflation will converge to a reasonable level, albeit with a possibly high degree of pain along the way.
New Buenos Aires notes
My last and rather lengthy Buenos Aires notes are from 2006, still worth a read. This time my visit was much shorter, but I had three dominant impressions. First, the city seems more “normal” and less Argentine than in times past. The nicer parts of town, as you might find in or near Palermo, seemed more “Pan-Latin” than anything else, as you might find in comparable parts of Mexico City or Bogotá. More hipster. More Brooklyn even. The whole “invisible stories about weird librarians obsessed with their cats” side of the city seems weaker these days. And along similar lines, traditional Argentinean food is harder to find.
Second, the talent of Argentina has been liberated from the country itself. Argentina has more unicorns — eleven! — than any other Latin American nation, though it is not close to tops in population. Yet for the most part these unicorns exist beyond the confines of Argentina. The top talents of Argentina seem to have used the internet more effectively to integrate into global markets than the top talents of other Latin countries. In contrast, Brazilian commercial talent seems best suited to…the rules of the game in Brazil.
Third, the country no longer seems to alternate between glorious hope and extreme despair. It seems more accepted that the country is not going to solve its fiscal or monetary problems, and instead will alternate between “OK enough” periods and “uh-oh inflation is really pretty high now” periods. Currently rates of price inflation are running at about fifty percent, and the black market exchange rate is about two times as favorable for the dollar as the official exchange rate. No one seems very surprised by this, nor is there much uncertainty about how things will end, nor is there great hope that “the reformers” will solve the problems. Yet a bounceback is likely to follow as well, sooner or later. The cyclical nature of the Argentine economy seems more accepted and enshrined in expectations. And the elite are more insulated from it than ever before, through a mix of Miami-based dollar accounts and crypto, and here are some tactics for the middle class (Bloomberg).
Fortunately, the economy is growing at an annualized rate of over eleven percent, though the year before it contracted by more than ten percent. None of that will end the cycle.
Buenos Aires remains one of the very best cities in the world, most of all in their summer.
Wednesday assorted links
1. Stephen Carter best books of the year list (Bloomberg).
2. Malcolm Gladwell on Bulletin on Paul Simon.
3. Should we have octopus farms?
4. Against proof of stake (you need to scroll down a bit to get to the interesting part). Is this the best piece on crypto and public choice/constitutional economics questions?
U.S.A. fact of the day
U.S. population grew by just 0.1% in the year ended July 1, 2021, "the lowest rate since the nation's founding," per Census Bureau population estimates released today.https://t.co/mkZ6NCL7V8 pic.twitter.com/ka45lazUcr
— Greg Giroux (@greggiroux) December 21, 2021
Stablecoin sentences to ponder
The real reason people use stablecoins is regulations make it difficult to convert crypto assets to traditional assets. Stablecoins are a creature of regulation in the same sense that money market funds were created in the 1970s to get around government limits on interest banks could pay retail depositors while the economy was running at double-digit inflation.
That is from Aaron Brown at Bloomberg.
Cognitive uncertainty in intertemporal choice
This paper studies the relevance of cognitive uncertainty – subjective uncertainty over one’s utility-maximizing action – for understanding and predicting intertemporal choice. The main idea is that when people are cognitively noisy, such as when a decision is complex, they implicitly treat different time delays to some degree alike. By experimentally measuring and manipulating cognitive uncertainty, we document three economic implications of this idea. First, cognitive uncertainty explains various core empirical regularities, such as why people often appear very impatient, why per-period impatience is smaller over long than over short horizons, why discounting is often hyperbolic even when the present is not involved, and why choices frequently violate transitivity. Second, impatience is context-dependent: discounting is substantially more hyperbolic when the decision environment is more complex. Third, cognitive uncertainty matters for choice architecture: people who are nervous about making mistakes are twice as likely to follow expert advice to be more patient.
Here is the full paper by Benjamin Enke and Thomas Graeber, this one seems to me a significant breakthrough on some longstanding puzzles of choice.
From the comments
Tuesday assorted links
1. Ethiopian government using foreign drones to turn the tide in the conflict (NYT).
3. Brian Eno on NFTs and also economics.
4. Andrew Lilley on Omicron severity. And more Zvi on severity, including his own, which seems to be OK.
5. The surge of talent into crypto (NYT).
6. log4j summary.
The supply chain that is Japanese
McDonald’s Japan has joined the unfortunate ranks of Toyota, Sony and other industrial titans that have fallen victim to a chip supply crisis.
The fast-food group said on Tuesday that because of delivery delays from Canada, it would only be able to offer the smallest serving of french fries at its 2,900 outlets. An emergency plan to ensure “continuous supply of french fries to customers” has been introduced, said a company spokesman.
And this I had not known:
For nearly half a century, Japanese consumers have ordered KFC chicken on Christmas thanks to an advertising campaign that successfully linked the fast-food chain with the holiday. KFC operates a family bucket pre-booking system to ensure that it meets the December 25 rush for deep-fried poultry.
Here is the full FT piece, via David Wessel.
Freddie on worry porn
Bogost’s piece is an absolute classic, maybe the classic, in a particularly strange form of worry porn that progressives have become addicted to in the past half-decade. It’s this thing where they insist that they don’t want something to happen, but they describe it so lustily, imagine it so vividly, fixate on it so relentlessly, that it’s abundantly clear that a deep part of them wants it to happen. This was a constant experience in the Trump era – liberals would imagine that Trump was about to dissolve Congress and declare himself emperor, they’d ostensibly be opposed to such a thing, but they were so immensely invested in the seriousness and accuracy of such predictions that they’d clearly prefer for it to happen. I wrote about Chris Hayes and his bitter yearning for Trump last week, and he’s a good example, someone who ruminates on Trump and the dystopian future he might bring about with such palpable emotional pathology that it’s clear that, on some level, he needs it to happen, so that he can say “I was right.” And so with Bogost here; that level of anxious catastrophizing always carries with it the quiet, throbbing need for the bad dream to come true. Covid is already bad, very bad. I am always so confused that so many people seem desperately to want it to be worse.
Here is the full essay.
How to figure out where crypto is headed
That is the topic of my latest Bloomberg column, the piece has a number of ideas. You can start with this:
…the concept of relevance is focality, by which I mean the part of the system at which consumers direct their attention. Focality could determine whether crypto ushers in an era of dystopian inequality, or whether most of its benefits accrue to broader society.
That all sounds quite abstract, so consider a simple example from the world of music. Famous artists such as the Beatles or Taylor Swift attract attention with their very names — in other words, they have become focal. Then there are performance spaces or bars that are known for putting on good music, such as the Blue Note or, in an earlier era, the Fillmore. In this case, the venue is focal.
So the question is this: When people patronize crypto institutions, will they attach significance to the “innovator” or to the “intermediary”? Or, to continue the analogy with the music industry, the artist or the venue.
One scenario is that ordinary Americans will simply find crypto too confusing to deal with directly. Rather than choosing their favorite crypto assets, DeFi investments and NFT providers, they will outsource their decisions to well-known intermediaries. Imagine entering into a crypto contract with a company you have an established relationship with, such as a social media company, your bank or perhaps your labor union. The intermediary would deliver a “crypto package,” tailored to the needs of a broad swath of customers.
Significant parts of the crypto world would be relatively centralized….
I think you can imagine which problems would arise in that scenario, including the reemergence of de facto censorship. Alternately:
Another very different scenario: Users focus their attention on the crypto assets themselves, such as Bitcoin, Ether or Dogecoin. That kind of user focus would mean many of the gains of crypto accrue to the early crypto asset holders. Intermediaries (e.g., Coinbase) can earn a return, but the real brand name value would be held by the crypto asset itself.
Much of today’s crypto world looks like this, though it may not last as crypto broadens in applications and use. If you are long current crypto assets, you may be hoping for this kind of scenario to extend itself, because those assets will accumulate much of the value from higher crypto demand.
Yet another scenario: What if the attention of consumers were focused on the crypto innovators, who in this case would be analogous to better-known musical artists? One person may think “I like the DeFi options at Uniswap,” while another may say, “I am going to use the prediction markets over at Hedgehog.” In this scenario there is relatively little intermediation and heavy competition for consumer attention. Thus most of the gains from competition accrue to the users.
Customers would use or own or invest in crypto in a variety of ways, just as they listen to music on LPs, CDs, MP3s and streaming services. And in the same way that people share their playlists, crypto users could issue their own tokens (currencies) if they wanted, or serve as their own banks in the sense of making their own lending decisions and executing them autonomously.
I don’t know if people are up to all this work (or is it fun?). But in my view this is the best-case scenario — and the most technologically ambitious. Interestingly, crypto’s radical ability to disintermediate, if extended to its logical conclusion, could bring about a radical equalization of power that would lower the prices and values of the currently well-established crypto assets, companies and platforms.
So you can be bullish on crypto’s future without being bullish on current crypto prices. For a simple analogy, Spotify and YouTube have greatly expanded music’s reach, but overall the price of recorded music has fallen, and many performers earn much less than did their peers in the LP era. Or consider the agriculture sector, defined broadly: It has done very well over the last few centuries, but food prices have fallen rather than risen, due to higher output and greater competition.
Recommended.
Texas, Utah, and Idaho fact of the day
The Texas population grew by about four million people in the past decade—far more than any other state in raw numbers, and enough as a percentage to make it the third-fastest-growing state in the nation over that period, behind Utah and Idaho.
Here is the full story, mostly about Texas. Mobility trends are one simple way to try to predict how America will evolve. For the pointer I thank the excellent Samir Varma.
Monday assorted links
What should I ask Sebastian Mallaby?
Sebastian Christopher Peter Mallaby (born May 1964) is an English journalist and author, Paul A. Volcker senior fellow for international economics at the Council on Foreign Relations (CFR), and contributing columnist at The Washington Post. Formerly, he was a contributing editor for the Financial Times and a columnist and editorial board member at The Washington Post.
His recent writing has been published in the New York Times, the Wall Street Journal, and the Atlantic Monthly. In 2012, he published a Foreign Affairs essay on the future of China’s currency. His books include The Man Who Knew (2016), More Money Than God (2010), and The World’s Banker (2004).
I am also a big fan of his new and forthcoming book on venture capital, namely The Power Law: Venture Capital and the Making of a New Future.
So what should I ask him?
*The Books of Jacob*
By Olga Tokarczuk, so far I am about 300 pp. through a total of nearly 900 pp. Might this be one of the greater novels of our time? I liked this description:
The Books of Jacob by the Nobel laureate Olga Tokarczuk is an epic chronicle of the life and times of Frank and his followers. Over a thousand pages long, dense with history and incident, it is vast enough to make this reader’s knees buckle. As crowded as a Bruegel painting, it moves from mud-bound Galician villages to Greek monasteries, 18th-century Warsaw, Brno, Vienna and the luxurious surroundings of the Habsburg court. It takes in esoteric theological arguments, diplomatic history, alchemy, Kabbalah, Polish antisemitism and the philosophical roots of the Enlightenment. It is a dauntingly ambitious piece of work and one of the responses it arouses is just plain amazement at the patience and tenacity that have gone into its construction.
And:
Dense, captivating and weird, The Books of Jacob is on a different scale from either of these. It is a visionary novel that conforms to a particular notion of masterpiece – long, arcane and sometimes inhospitable. Tokarczuk is wrestling with the biggest philosophical themes: the purpose of life on earth, the nature of religion, the possibility of redemption, the fraught and terrible history of eastern European Jewry. With its formidable insistence on rendering an alien world with as much detail as possible, the novel reminded me at times of Paradise Lost. The vividness with which it’s done is amazing.
Both passages by Marcel Theroux. I still need to read more, but this stands a very good chance of being one of the must-read novels of the twenty-first century. I ordered my copy pre-emptively from the UK and am very glad I did so, other Americans need to wait until February.
That is from Naveen K.