In which ways does inflation harm the poor?
That is the topic of my latest Bloomberg column, here is one bit:
One major factor: The poor is the socioeconomic group that finds it hardest to purchase a home, and real estate seems to be one of the best inflation hedges. U.S. real estate prices have been on a tear for some time, including through the recent inflationary period…
The poor also save less, including as a share of their incomes, because they have to spend a relatively large percentage of their incomes on necessities. That means they have smaller buffers against many kinds of changes and uncertainties, including those of inflation.
Some researchers have referred to inflation as a “regressive consumption tax,” because cash balances are so often the pathway to consumption for poorer income groups. Poorer individuals also are less likely to have cash management accounts and other asset holdings that might partially insulate them from the losses of inflation.
And:
Probably the strongest argument in favor of the notion that the poor are less affected by inflation is that inflation can, under some circumstances, lower the real value of debt. If prices go up 7%, and your income goes up 7%, all of a sudden your debts — which typically are fixed in nominal value — are worth 7% less.
This mechanism is potent, but it assumes that real wages keep pace with inflation. Right now real wages are falling, and with higher inflation may continue to do so. Furthermore, many poor people roll over their debts for longer periods of time. Repaying those debts will eventually be cheaper in inflation-adjusted terms, but not anytime soon.
I’ve been focusing on the U.S., but elsewhere in the world the general correlation is that high inflation and high income inequality go together. Correlation is not causation, but those are not numbers helpful to anyone who wishes to argue that inflation is a path to greater income equality. Have very high levels of inflation done much for the poor in Venezuela and Zimbabwe? And if you ask which group would benefit from an improvement in living standards prompted by higher rates of investment, as might follow from a period of stability — it is the poor, not the wealthy.
There is further content at the link.
Robert Downey does his own version of Fast Grants
Unfortunately, if there’s one major shortcoming of our existing scientific institutions, it’s speed. In the earliest days of the pandemic, as researchers raced to understand COVID-19 and test ideas for response, a group of outsider philanthropists stepped up to create Fast Grants for quick-turnaround financial resources for new questions and ideas. The program did more than just fund projects, it showed that there was a more effective, less bureaucratic way to support scientists…
We are in the business of supporting entrepreneurial scientists and we are in agreement that the major impediments are the obvious limitations of decision-making by committee. We’re trying something different. FootPrint Coalition is funding early research in brand new environmental fields, and doing it under the direction of esteemed Science Leads who can move quickly and fund at their discretion. The FootPrint Coalition Science Engine builds off suggestions made in the Funding Risky Research paper. It operationalizes the “loose-play funding for early-stage risky explorations” but doesn’t bind it to universities.
We’re doing it “in public” on the Experiment funding platform, a website for crowdfunding science research projects, so anyone can participate as a cofunder.
I am delighted to see so many philanthropic experiments in the works. And yes it is that Robert Downey…
Thursday assorted links
1. The NBA’s Covid dilemma. I don’t think they will do it.
Will this Australian polity prove sustainable?
And what would Lysander Spooner say?:
South Australian Premier Steven Marshall said the two-week rule for vaccinated close contacts was under constant review.
And:
When Shaun Ferguson was browsing the plants at a local nursery last Tuesday afternoon, he never thought it would land him in two weeks quarantine in a medi-hotel.
That night he received the text message that no one wants to receive.
“At about 11.30 that night I got a text message from SA Health saying that I’d been to a potential exposure site for the Omicron strain,” Mr Ferguson said…
There were three other people on the bus with him, including a woman who had also visited the pet and plant shop in Glengowrie.
“She said, ‘I never go anywhere, I’m fully vaccinated … I just decided I’d go there and get this cat brush and now look what happens. I’m in quarantine,'” Mr Ferguson said.
There is much more to the story, and for the pointer I thank A.
Arc Institute
Headquartered in Palo Alto, California, Arc is a nonprofit research organization founded on the belief that many important scientific programs can be enabled by new organizational models. Arc operates in partnership with Stanford University, UCSF, and UC Berkeley.
Arc gives scientists no-strings-attached, multi-year funding, so that they don’t have to apply for external grants, and invests in the rapid development of experimental and computational technological tools.
As individuals, Arc researchers collaborate across diverse disciplines to study complex diseases, including cancer, neurodegeneration, and immune dysfunction. As an organization, Arc strives to enable ambitious, long-term research agendas.
Arc’s mission is to accelerate scientific progress, understand the root causes of disease, and narrow the gap between discoveries and impact on patients.
An auspicious debut, here is the website, and here is further interpretation from Patrick Collison.
My Conversation with Ray Dalio
Here is the audio and video and transcript. Here is part of the CWT summary:
Ray joined Tyler to discuss the forces that will affect American life in the coming decades, why we should be skeptical of the saliency of current equities prices, the market as a poker game, the benefits and risks of the US dollar as the world reserve currency, why he thinks US inflation will not be transitory, the key to his success as an investor, how studying the Great Depression enabled him to anticipate the 2008 financial crisis, Bridgewater’s culture of radical transparency, the usefulness of psychometric profiles, where the United States is falling short most in terms of moral character, his truth-seeking process, the kinds of education crucial to building a successful dynasty or empire — and what causes them to fail, how transcendental meditation helps him be creative and objective, what he loves about jazz music, what we undervalue about the ocean, why he loves bow-hunting Cape Buffalo, and more.
Here is one excerpt:
COWEN: If we think about macroeconomic cycles, Christina Romer claims a lot of downturns are the result of Fed contractions. Jim Hamilton claims that some downturns are the result of high oil price shocks, and you have a theory of debt cycles. If you’re just trying to apportion out mentally, how many of the cycles are Fed contractionary shocks? How many are oil shocks? How many are debt cycles? How do you see that landscape?
DALIO: I think that there’s goods and services that exist in a certain quantity, and then there’s a certain amount of money and credit, and they interact. And throughout history, if you have, let’s say, an oil shock that is not accommodated by an easing of central bank policy — in other words, the production of more money and credit — then, what I’m saying, if there was the same money and credit and you had an oil shock, then as oil goes up, something else would have to go down, and it would produce one set of circumstances.
It wouldn’t produce the same inflation. It would produce a consequence, and it would produce a transfer of wealth for those who are selling the oil at a high price — they gain wealth. And it would produce a decrease in the wealth for those who are having to pay that higher price. For example, it would make Middle Eastern countries richer, and it would make American companies and American entities poorer. That’s what would happen in a world in which we were to look at those items, and that certainly can cause a downturn in the economy.
Similarly now, where you can print money and credit, you can create money and credit, and it could have its effects. But to answer your question about do oil shocks or Fed policy have an effect? The answer is both because, for other reasons, the tightening of money and credit reduces demand for things, and as a result of reducing the demand for things, it weakens the economy.
Both an oil price shock or some other shock or a Federal Reserve tightening can cause the economy to weaken. That’s the answer to your question. Then it would have different implications, depending on whether the central banks provided more or less money and credit.
There is much more at the link! And if you would like to donate to support Conversations with Tyler, here is the link.
*The Founders*
The author is Jimmy Soni, and the subtitle is The Story of Paypal and the Entrepreneurs Who Shaped Silicon Valley.
It is illuminating on start-ups, the earlier history of Silicon Valley, and it is a fair treatment of Peter Thiel. It is an actual history of the company, based on a great deal of information, rather than a polemic on tech or the company’s founders.
Wednesday assorted links
1. In nuclear war simulations, most people choose the escalatory options.
2. Reddit thread on which are the funniest comedies. Not many recent movies on that list.
3. Charles R. Morris has passed away (NYT).
4. Samosa markets in everything?
5. Has Magnus Carlsen played his last world championship match?
6. Will Mexico City ban bullfighting?
7. A possible theory as to why Omicron might be safer — important if true.
Who is protected against Omicron?
The vaccine made by Sinovac Biotech Ltd., one of the most widely used in the world, doesn’t provide sufficient antibodies in two doses to neutralize the omicron variant and boosters will likely be needed to improve protection, initial lab findings showed.
While the first two studies to be released on the Chinese shot and omicron diverged on how much the vaccine’s immune response is degraded, they both indicated the standard two-dose course would not be enough, raising uncertainty over a shot relied on by millions of people in China and the developing world to protect against Covid-19.
Among a group of 25 people vaccinated with two Coronavac doses, none showed sufficient antibodies in their blood serum to neutralize the omicron variant, said a statement from a team of researchers at the University of Hong Kong released late Tuesday night.
Here is more from Bloomberg.
Austin Vernon on inflation
I think you have tangentially mentioned this before, but might it be that we are worse at measuring inflation/quality in services than goods? So maybe there has been 3-4% inflation post 2008 instead of 1-2% but it isn’t measured because it comes in the form of decreased service quality. Service list prices might be sticky. And now we see the inflation more clearly because the fiscal stimulus is larger and consumption shifted into goods from services.
From my email. I am not so sure about post-2008, but the point may hold real relevance for today.
Don’t tell Charlie Munger
I don’t believe this result, but it is at least worth a ponder:
Previous research has found significant impacts of daylight and views on the cognitive function of office workers. In this study, we use scores on decision-making performance to estimate the annual economic potential of optimizing daylighting and views in U.S. offices. Cognitive scores were compared against over 100,000 previous test scores to obtain the distributional shift in cognitive performance when working in an office with optimized daylighting and views as opposed to an office with traditional blinds. These changes in performance were then compared to compensation data from the Bureau of Labor Statistics. Office workers shifted on average from the 52nd percentile to 65th percentile, equivalent to a $11,809 difference in salary per person per year. When conservatively accounting for the number of employees working within 15 ft of a window with blinds, optimizing daylight and views in U.S. offices has the potential to generate $352B ($240B–$464B), or 1.7% of the 2018 U.S. gross domestic product (GDP), in additional productivity. These findings suggest that building developers, architects and tenants should give additional attention to daylight design and façade technology as they consider new building construction, renovation and leasing options.
Here is the full piece by Piers MacNaughton et.al., via the excellent Kevin Lewis.
Will China ever get Pfizer?
As Covid-19 started spreading in Wuhan early last year, Chinese billionaire Guo Guangchang’s drugmaker appeared to have scored a big win: A partnership with Germany’s BioNTech SE, which went on to produce with Pfizer Inc. one of the world’s most successful vaccines against the coronavirus.
Yet almost a year later, the shot is yet to be approved in mainland China, and in recent weeks Beijing has thrown its heft behind a homegrown mRNA vaccine, allowing China’s Walvax Biotechnology Co. to test its own experimental shot as a booster. The developments are raising new questions about whether the U.S.-German vaccine, licensed for the potentially lucrative Greater China region by Guo’s Shanghai Fosun Pharmaceutical Group Co., will ever be used on the mainland, where President Xi Jinping’s administration has backed a nationalist agenda on all fronts, including in the fight against the virus.
Here is more from Bloomberg. And will China ever get Omicron? Yes. Pfizer, maybe not.
Tuesday assorted links
1. William James on personal energy.
2. CSPI policy reform essay contest.
4. Anne Rice obituary (NYT). I quite like Witching Hour and also the first two vampire novels.
5. Jennifer Doleac on how to reduce recidivism.
6. Mormon fertility rates are plummeting.
7. New Omicron data from South Africa, from an insurance company.
Omicron in China
China’s efforts to keep the new coronavirus strain out of its borders have failed, with the country reporting its first case of the Omicron variant in the coastal city of Tianjin on Monday (Dec. 13).
The timing and location of the new case are not ideal for China’s leadership. Tianjin is right next door to Beijing, which is due to hold the Winter Olympics in a matter of weeks.
The news coincides with an expanding cluster of cases of the Delta variant in another coastal province, Zhejiang. The outbreak has seen at least a dozen publicly traded companies immediately suspend production in the province, according to a Guardian report.
Here is the full story. Casualties issues aside (which remain unclear), this development may also be of considerable import to the political economy of China, a country that has promised near-zero Covid to its citizens, and derived legitimacy from its degree of success so far. Yet China has low levels of natural immunity, and the effectiveness of its vaccine investments to date remains uncertain against Omicron, or for that matter against Delta. And here is The Zvi’s update on Omicron more generally.
Those new vaccine service sector jobs MIE
A man in New Zealand who reportedly received up to 10 Covid vaccines in a day on behalf of others is under investigation by the country’s Ministry of Health, Newsweek reported.
Reports indicate that the unnamed man was paid by multiple individuals to pretend to be them while obtaining a vaccine, in an effort to avoid vaccination requirements.
Here is the full story, via Air Genius Gary Leff. Not long ago I was wondering how many vaccines you could take in a day and still survive…this is data!