Category: Current Affairs
The economics of stolen celebrity photos
Here is one passage of interest, illustrating collective action dilemmas of various kinds:
The first post from this set that I could track down was nearly 5 days to the story becoming public, on the 26th of August. Each of those posts was a censored image with a request for an amount of money for an uncensored version. After numerous such posts and nobody paying attention to it (thinking it was a scam) the person behind the posts began publishing uncensored versions, which quickly propagated on anon-ib, 4chan and reddit. My theory is that other members of the ring, seeing the leaks and requests for money also decided to attempt to cash in thinking the value of the images would soon approach zero, which lead to a race to the bottom between those who had access to them.
There is more here, with some interesting exposition as well, via Lawrence Krubner.
If Scotland goes independent
Goldman Sachs has warned that the UK could fall into a eurozone-style crisis if Scotland votes for independence later this month.
In some of the most bleak predictions economists have made about independence, the Wall Street bank said a “Yes” vote on September 18, while looking unlikely, “could have severe consequences” for both the Scottish economy and the UK overall.
Goldman warned that public services would have to be cut if Scotland goes it alone, and that the country would face much higher borrowing costs.
But the most worrying consequence, the bank predicted, would be that uncertainty over a currency union would cause a run on sterling and a capital flight with echoes of the eurozone crisis.
“The most important specific risk, in our view, is that the uncertainty over whether an independent Scotland would be able to retain sterling as its currency could result in an EMU-style currency crisis occurring within the UK,” wrote Kevin Daly, senior economist at Goldman.
Here is more, from James Titcomb. You should consider that speculative, but it is worth putting on the table.
Per capita Medicare spending is falling
I did not expect to be reading this within my lifetime, and yet here it is:
Medicare spending isn’t just lower than experts predicted a few years ago. On a per-person basis, Medicare spending is actually falling.
That is from Margot Sanger-Katz, there is more here. Do please note that the program still faces fiscal pressures, in part due to the ongoing rise in “n,” namely future program beneficiaries.
Soft landing vs. hard landing
Michael Pettis writes:
The choice, in other words, is not between hard landing and soft landing. China will either choose a “long landing”, in which growth rates drop sharply but in a controlled way such that unemployment remains reasonable even as GDP growth drops to 3% or less, or it will choose what analysts will at first hail as a soft landing – a few years of continued growth of 6-7% – followed by a collapse in growth and soaring unemployment.
A “soft landing” would, in this case, simply be a prelude to a very serious and destabilizing contraction in growth. Rather than hail the soft landing as a signal that Beijing is succeeding in managing the economic adjustment, it should be seen as an indication that Beijing has not been able to implement the reforms that it knows it must implement. A “soft landing” should increase our fear of a subsequent “hard landing”. It is not an alternative.
There is more here.
Why I am a relative optimist about Bolivia
1. Bolivia became a semi-stable democracy in the early 1980s and it has stayed that way.
2. For all the rhetoric to the contrary, the current regime is a mix of 1990s-era market-oriented reforms and Evo Morales. Probably you like one of these, though perhaps not both.
3. Many more Bolivian children go to school than before, and the incidence of malnutrition has been plummeting, with longer-run benefits for IQ. You will read many fabricated or non-causally-backed claims about the connection between inequality and growth, but for Bolivia I believe these arguments.
4. Bolivia has done so many things wrong in the past, there is a lot of low-hanging fruit through purely internal improvements. For instance the country is a fantastic tourist destination, but would not at this moment be experienced that way by mainstream American tourists, due to language, hotel, and infrastructure shortcomings. Eventually those problems can be and will be solved. Eventually.
5. Bolivia does not have much export exposure to China, and does not face much geopolitical risk.
6. Of all commodities, hydrocarbons may be relatively protected in price through the forthcoming global turmoil, because the Middle East implosion will make Bolivia’s current main resource more valuable.
7. Bolivia’s fiscal situation is surprisingly sound.
The three main reasons to be pessimistic about Bolivia are:
1. Most of their economic policy is quite bad, especially when it concerns the nationalization of foreign direct investment. The FDI future of Bolivia will be extremely unfavorable. The rhetoric and indeed the behavior of the government sometimes is like a villain from an Ayn Rand novel.
2. Their main trading partner is Brazil, a country which will have gone from eight percent growth to near-zero growth in but a few years time. Argentina is either the number two or number three trade partner, along with the U.S., depending on the year in question.
3. Bolivia hasn’t done that well in the past.
Of those three reasons, #1 probably matters a bit less than you might think, and #3 a bit more.
It is much debated in Bolivia whether corruption is going up or down. I believe it is going up, but partially for good reasons. For instance the construction sector is doing well, and construction tends to be corrupt in many countries, for reasons intrinsic to the activity itself (e.g., lots of big contracts, easy to claim invisible expenses, etc.). That means higher corruption but also a better corruption than the penny ante bribes of a shrinking economy.
Right now Bolivia is growing at a rate of above six percent.
Putin ends the interregnum
By Lilia Shevtsova, this is the best essay I have read on Russia, Ukraine, and Putin. It is difficult to excerpt, but here is one short bit:
Having flipped the global chessboard with his annexation of the Crimea and an undeclared war against Ukraine, Putin effectively ended the most recent period of interregnum and inaugurated a new era in global politics. However, no one yet knows what this era will bring. The global community is still reeling in shock, when it isn’t trying to pretend that nothing extraordinary has in fact occurred. This denial of the fact that the Kremlin has dealt a blow to conventional ideas, stable geopolitical constructs, and (supposedly) successful policies proceeds from the natural instinct for self-preservation. It is also quite natural that the political forces that have grown accustomed to the status quo will try to look to the past for answers to new challenges—this is precisely what those who were unprepared for a challenge always do. It was easy enough to predict that many politicians and political analysts would explain what Putin has done to the global order by using Cold War analogies. Drawing these historical parallels is potentially useful in only one respect: if they help us to see what is truly new about the current situation, and the scale of the risks involved.
Read the whole thing.
Along what axis is the Ukrainian electorate aligned right now?
It seems to be economic policy orientation toward Europe or Russia, and not either language or ethnicity. Here is a new paper by Timothy Frye:
Language, ethnicity, and policy orientation toward Europe are key cleavages in Ukrainian politics, but there is much debate about their relative importance. To isolate the impact of candidate ethnicity, candidate native language, and candidate policy orientation on a hypothetical vote choice, I conducted a survey experiment of 1000 residents of Ukraine in June 2014 that manipulated three features of a fictional candidate running for parliament: 1) ethnicity as revealed by either a Russian or Ukrainian name 2) native language of Russian or Ukrainian and 3) support for closer economic ties with Russia or with Europe. The results reveal little difference in the average response to these 8 fictitious candidates despite the candidate’s different ethnicities, native language, and economic policy orientations. This seeming homogeneity masks vast differences in the responses of self-reported native speakers of Russian and Ukrainian. Analyzing the responses among Ukrainian and among Russian speakers yields considerable differences in the responses to the different candidates. Perhaps most striking is that among both native speakers of Russian and native speakers of Ukrainian a candidate’s economic policy orientation toward Europe or Russia appears to be a more important determinant of vote choice than a candidate’s language or ethnicity. That policy retains its importance for voters despite the intense politicization of both ethnicity and language and ongoing violence in eastern Ukraine suggests that vote choice in Ukraine has not been reduced to an ethnic or linguistic census.
Hat tip goes to www.bookforum.com.
Japan fact of the day
Exports are 16 per cent below the peak reached in 2008 in real terms, according to data from CLSA.
From Henny Sender at The FT, there is more here.
China estimate of the day
Mr Gan estimates that China’s existing housing stock is already more than sufficient for every household to own their home but developers are still supplying well over 15m new units a year.
There is more here from Jamil Anderlini in the FT, more than just the usual.
Good news from India
U.S.-based economist Arvind Subramanian is poised to be named as chief economic adviser to Prime Minister Narendra Modi’s government, two sources at the finance ministry said on Friday.
There is more here, via David Wessel. Here are previous MR posts on Subramanian.
Ferguson and the Modern Debtor’s Prison
How does a stop for jaywalking turn into a homicide and how does that turn into an American town essentially coming under military control with snipers, tear gas, and a no-fly zone? We don’t yet know exactly what happened between the two individuals on the day in question but events like this don’t happen without a deeper context. Part of the context is the return of debtor’s prisons that I wrote about in 2012:
Debtor’s prisons are supposed to be illegal in the United States but today poor people who fail to pay even small criminal justice fees are routinely being imprisoned. The problem has gotten worse recently because strapped states have dramatically increased the number of criminal justice fees….Failure to pay criminal justice fees can result in revocation of an individual’s drivers license, arrest and imprisonment. Individuals with revoked licenses who drive (say to work to earn money to pay their fees) and are apprehended can be further fined and imprisoned. Unpaid criminal justice debt also results in damaged credit reports and reduced housing and employment prospects. Furthermore, failure to pay fees can mean a violation of probation and parole terms which makes an individual ineligible for Federal programs such as food stamps, Temporary Assistance to Needy Family funds and Social Security Income for the elderly and disabled.
A new report from Arch City Defenders, a non-profit legal defense organization, shows that the Ferguson municipal courts are a stunning example of these problems:
Ferguson is a city located in northern St. Louis County with 21,203 residents living in 8,192 households. The majority (67%) of
residents are African-American…22% of residents live below the poverty level.…Despite Ferguson’s relative poverty, fines and court fees comprise the second largest source of revenue for the city, a total of $2,635,400. In 2013, the Ferguson Municipal Court disposed of 24,532 warrants and 12,018 cases, or about 3 warrants and 1.5 cases per household.
You don’t get $321 in fines and fees and 3 warrants per household from an about-average crime rate. You get numbers like this from bullshit arrests for jaywalking and constant “low level harassment involving traffic stops, court appearances, high fines, and the threat of jail for failure to pay.”
If you have money, for example, you can easily get a speeding ticket converted to a non-moving violation. But if you don’t have money it’s often the start of a downward spiral that is hard to pull out of:
For a simple speeding ticket, an attorney is paid $50-$100,
the municipality is paid $150-$200 in fines and court costs, and the
defendant avoids points on his or her license as well as a possible
increase in insurance costs. For simple cases, neither the attorney nor
the defendant must appear in court.However, if you do not have the ability to hire an attorney or pay
fines, you do not get the benefit of the amendment, you are assessed
points, your license risks suspension and you still owe the municipality
money you cannot afford….If you cannot pay the amount in full, you must appear in court on that night to explain why. If you miss court, a warrant will likely be
issued for your arrest.People who are arrested on a warrant for failure to appear in court
to pay the fines frequently sit in jail for an extended period. None of the
municipalities has court on a daily basis and some courts meet only
once per month. If you are arrested on a warrant in one of these
jurisdictions and are unable to pay the bond, you may spend as much as
three weeks in jail waiting to see a judge.
Of course, if you are arrested and jailed you will probably lose your job and perhaps also your apartment–all because of a speeding ticket.
As a final outrage, consider this story which ties together Ferguson, the courts, and the arrest of parents, often minority parents, for leaving their kids to play in parks (just as my parents did).
According to local judge Frank Vatterott, 37% of the courts responding to his survey unconstitutionally closed the courts to non-defendants. Defendants are then faced with
the choice of leaving their kids on the parking lot or going into court. As Antonio Morgan described after being denied entry to the court with his children, the decision to leave his kids with a friend resulted in a charge of child endangerment.
Is Europe’s problem not enough government spending? (EU fact of the day)
Here is an update from Leonid Bershidsky:
Among the 28 EU members, public spending reached 49 percent of gross domestic product in 2013, 3.5 percentage points more than in 2007.
There is more detail at the link, via Garett Jones, Humanist by way of Walt Whitman, Civilizationist by way of Jane Jacobs.
Clay Shirky on the economics of the demise of print
He brings new life to a much-covered topic, here is one good bit of many:
Inserts are one of the last sources of advertising to resist digitization. They are also the next to go. Businesses like Cellfire and Find & Save are working on digital coupons; stores like Kroger’s and Safeway already offer online coupons direct to customers. This digitization is progressing as print circulation decays. Back in Roanoke, the Times was on the market for 5 years before it was bought; in that time the paper lost a quarter of its Sunday readers — 106,000 to 85,000 — and a third of its weekday readers — 96,000 to 65,000. This story too is being repeated all over the country. The print audience continues to defect to mobile, abandon the local paper, or die.
As digital alternatives become attractive while print circulation withers, business will start to shift their money away from inserts. When the inserts go, Sundays won’t prop up the rest of the week. When Sundays turn bad, the presses will become unprofitable.
The full piece is here, and for the pointer I thank Hugo Lindgren.
Edward Hugh on the Italian runaway train
Here is one bit:
The combination of low inflation and low growth means that it is the evolution of nominal GDP that really matters now. Nominal GDP is non inflation corrected GDP (or GDP at current rather than constant prices). If inflation remains low or even becomes negative, then nominal GDP will hardly increase and may even continue to contract (as has happened in Japan). The result is bound to be that the gross government debt to GDP ratio rises above the 135.6% it hit in March.
One of the arguments frequently advanced about how this dynamic could be turned around would be for Italy to run a “large” primary budget surplus. Now the emphasis here is on large since the country has in fact run a primary surplus (income – expenditure before paying debt interest) since the early 1990s, but that hasn’t stopped the weight of the debt climbing and climbing.
The full post is here, scary throughout.
Europe’s problem isn’t just the deflation
Leonid Bershidsky writes:
For more than four years, consumer prices in Switzerland have risen at an annual pace well below 1 percent. In 2012 and 2013, the country even experienced deflation. Yet its economy has grown at a steady pace, and is expected to expand by 2 percent this year. The unemployment rate is a low 3.2 percent.
He makes some good points, but I think he is too complacent about the costs of deflation for less flexible economies.