Category: Current Affairs
Vox is up!
You will find the introductory video here.
Here is an explainer for Game of Thrones.
Here is Ezra on how politics makes us stupid.
Those two articles are very good, and “work” in the intended manner. Here is the regular home page www.vox.com.
Is it possible their real competition is Coursera?
David Brooks on the McCutcheon decision
The Supreme Court just voted to eliminate aggregate contribution limits, here is David’s response:
The McCutcheon decision is a rare win for the parties. It enables party establishments to claw back some of the power that has flowed to donors and “super PACs.” It effectively raises the limits on what party establishments can solicit. It gives party leaders the chance to form joint fund-raising committees they can use to marshal large pools of cash and influence. McCutcheon is a small step back toward a party-centric system.
In their book “Better Parties, Better Government,” Peter J. Wallison and Joel M. Gora propose the best way to reform campaign finance: eliminate the restrictions on political parties to finance the campaigns of their candidates; loosen the limitations on giving to parties; keep the limits on giving to PACs.
Parties are not perfect, Lord knows. But they have broad national outlooks. They foster coalition thinking. They are relatively transparent. They are accountable to voters. They ally with special interests, but they transcend the influence of any one. Strengthened parties will make races more competitive and democracy more legitimate. Strong parties mobilize volunteers and activists and broaden political participation. Unlike super PACs, parties welcome large numbers of people into the political process.
For which political views should a CEO have to resign?
Andrew Sullivan argues Eich should not have been forced to resign from Mozilla for his anti-gay marriage donations, combined with his unwillingness to recant his position. As a supporter of gay marriage (as of course Sullivan is too), I very much agree. Like Sullivan, I see such such ideological witch hunts as unjust, counterproductive, and stifling of free discourse.
I see some further economic angles to this dispute.
First, it implies the market share of browsers is fairly arbitrary, and highly subject to potential consumer rebellion. I can think of other businessmen who have alienated parts of the American public through their political stances, but still their products are bought and there is little talk of deposing them from their leadership roles. Free products seem especially vulnerable to fluctuations in corporate image, in part because no product has a durable edge on price. Since more of our economy seems headed in the direction of “free to consumers for direct use,” we might want to start thinking about this tendency a little more carefully and cautiously. Charging people a positive price liberates you to be less conformist, at least provided you fare well in market competition.
Second, ambitious young people just got more boring. It wasn’t long ago that opposition to gay marriage was the mainstream position in American society and of course in many places it still is.
Third, let’s say that “recantation” is becoming more important and more potent as a defense mechanism against charges (I’m not sure this is generally true, but it does seem to be true in the Eich case). That will make people more likely to express their eccentricities in youthful bursts, rather than as a consistent pattern of donations or support over many years. Consistent support over time is harder to recant, but a single act is easier to write off as a youthful indiscretion.
The costs of measuring value too precisely (model this)
…the editors at The Verge have a policy that seems a little bit odd and anachronistic: They don’t let writers see how much traffic their stories generate. Ever.
As the American Journalism Review reported, in a piece called “No Analytics for You: Why The Verge Declines To Share Detailed Metrics With Reporters,” the editors at The Verge simply don’t want their writers thinking about traffic.
What’s more, The Verge is not alone in this practice. Re/code, a tech site run by Kara Swisher and Walt Mossberg, the longtime Wall Street Journal tech columnist, also won’t share traffic stats with writers. MIT Technology Review holds numbers back too.
“We used to show the writers and editors traffic, and told them to grow it; but it had the wrong effect. So we stopped,“ says Jason Pontin, CEO, editor in chief and publisher of MIT Technology Review. ”The unintended consequence of showing them traffic, and encouraging them to work to grow total audience, is that they became traffic whores. Whereas I really wanted them to focus on insight, storytelling, and scoops: quality.”
That phrase – “traffic whore” – tells you everything you need to know about why some journalists have an aversion to chasing traffic. They fear it creates an incentive to do the wrong things.
Of course these policies hold only at some margins I believe…nor are they used at Gawker.
The full article, by Dan Lyons, is here.
Loan growth and the taper
From Sober Look, there is further discussion and pictures here.
Average is Over
New technologies are transforming the structure of the US economy but creating only modest numbers of jobs, according to the biggest official survey of businesses, conducted only once every five years.
The 2012 economic census shows how technology is creating a boom in output for new industries – such as shale gas and internet retail – but only a modest increase in their payrolls.
It highlights concerns that recent innovations in information technology tend to raise productivity by replacing existing workers, rather than creating new products that demand more labour to produce.
The FT link is interesting throughout and I believe these numbers vindicate what many of us have been arguing. It also stresses the oft-neglected point that mining and drilling are relatively capital-intensive sectors:
Drilling is capital intensive, however, so even though the industry’s sales rose by $142bn, its annual payroll was up only $20bn to $61bn in total.
It also turns out that online retail is not very labor intensive at current margins.
*Asia’s Cauldron*
That is the new book by Robert D. Kaplan, and the subtitle is The South China Sea and the End of a Stable Pacific. Since this is possibly the most important topic in the world right now, you should read this book. Here is one interesting excerpt of many:
According to Yale professor of management and political science Paul Bracken, China isn’t so much building a conventional navy as an “anti-navy” navy, designed to push U.S. sea and air forces away from the East Asian coastline. Chinese drones putting lasers on U.S. warships, sonar pings from Chinese submarines, the noisy activation of Chinese smart mines, and so on are all designed to signal to American warships that Beijing knows about their movements and the United States risks a crisis if such warships get closer to Chinese waters. Because “relations with China are too important to jeopardize with a military confrontation,” this anti-access strategy has a significant political effect on Washington. “The strategic impact of China’s agility is not so much to tilt the military balance in its direction and away from the United States. Rather,” bracken goes on, “it introduces new risks into the American decision-making calculus.”
Some chapters of this book are deeper and better thought out than others, but still it is definitely worth reading.
Metadata Reveals Sensitive, Private Information
The President and other apologists for the NSA have defended the NSA’s illegal mass surveillance of US telephones by arguing that it’s “only” metadata, so “nobody is listening to our telephone calls.” But where, when, how long and to whom customers make phone calls does reveal information that could easily be used to blackmail, stifle and control. A group of computer scientists at Stanford’s Security Laboratory gathered information from volunteers who agreed to have an app on their cell phone mimic what the NSA collects. Here is an initial report.
At the outset of this study, we shared the same hypothesis as our computer science colleagues—we thought phone metadata could be very sensitive. We did not anticipate finding much evidence one way or the other, however, since the MetaPhone participant population is small and participants only provide a few months of phone activity on average.
We were wrong…The degree of sensitivity among contacts took us aback. Participants had calls with Alcoholics Anonymous, gun stores, NARAL Pro-Choice, labor unions, divorce lawyers, sexually transmitted disease clinics, a Canadian import pharmacy, strip clubs, and much more. This was not a hypothetical parade of horribles. These were simple inferences, about real phone users, that could trivially be made on a large scale.
…Though most MetaPhone participants consented to having their identity disclosed, we use pseudonyms in this report to protect participant privacy.
- Participant A communicated with multiple local neurology groups, a specialty pharmacy, a rare condition management service, and a hotline for a pharmaceutical used solely to treat relapsing multiple sclerosis.
- Participant B spoke at length with cardiologists at a major medical center, talked briefly with a medical laboratory, received calls from a pharmacy, and placed short calls to a home reporting hotline for a medical device used to monitor cardiac arrhythmia.
- Participant C made a number of calls to a firearm store that specializes in the AR semiautomatic rifle platform. They also spoke at length with customer service for a firearm manufacturer that produces an AR line.
- In a span of three weeks, Participant D contacted a home improvement store, locksmiths, a hydroponics dealer, and a head shop.
- Participant E had a long, early morning call with her sister. Two days later, she placed a series of calls to the local Planned Parenthood location. She placed brief additional calls two weeks later, and made a final call a month after.
We were able to corroborate Participant B’s medical condition and Participant C’s firearm ownership using public information sources. Owing to the sensitivity of these matters, we elected to not contact Participants A, D, or E for confirmation.
In other news, a former president believes that his email is being monitored. He is probably correct. Monitoring presidential candidates is all too realistic.
Fortunately, President Obama has announced that the bulk collection of phone calls will end. Dismantling that illegal program is a start. Obviously, this would not have happened without the revelations of Edward Snowden.
Should we teach the habits of highly effective people?
Faculty members at Alamo Colleges in San Antonio objected earlier this year to their chancellor’s move to make a course inspired in part by the popular self-help book The 7 Habits of Highly Effective People part of the core curriculum. Instructors said they felt left out of the decision-making process and weren’t sure if the course, which would replace one of only two required humanities classes in the core, deserved that kind of curricular billing.
It is strange, is it not, that the attempt to teach habits of highly effective people is considered gauche and unworthy of the time of students? (It is unlikely that the objections stem from a belief that the wrong habits are being taught. That said, you can read more about the Mormon roots of Stephen Covey and his ideas here.) You can read more about the episode at Alamo Colleges here.
How much is Chinese defense spending really going up?
I don’t feel I have gotten to the bottom of this, but here is an interesting contrarian perspective:
“According to my records, 2013 is the second year in a row in which China’s actual defense spending wound up being significantly less than was announced at the beginning of the year,” said Roger Cliff, senior fellow with the Asia Security Initiative at the Atlantic Council.
“The announced budget in March 2013 was … an increase of 10.7 percent over 2012. Actual expenditure in 2013 was … an increase of only 7.6 percent over 2012.”
The announced increases also never account for inflation, Cliff said. “Inflation in 2013 was expected to be 3.2 percent, official inflation figures for 2013 haven’t been released yet, as far as I know, so the increase in defense spending from 2012 to 2013 was only 4.3 percent in real terms.
“In fact, since 2009, China’s defense budget has grown by an average of only 4.7 percent in real terms,” Cliff said. “And yet, because the increases are always announced in nominal terms, not real terms, and the budgets announced at the beginning of the year have been exceeding the amount actually spent, everyone is still talking about ‘annual double-digit increases in China’s defense spending.’ ”
The full article is here.
Are the Long-Term Unemployed on the Margins of the Labor Market?
There is new Brookings research by Alan B. Krueger, Judd Cramer, and David Cho:
The short-term unemployment rate is a much stronger predictor of inflation and real wage growth than the overall unemployment rate in the U.S. Even in good times, the long-term unemployed are on the margins of the labor market, with diminished job prospects and high labor force withdrawal rates, and as a result they exert little pressure on wage growth or inflation.
Consistent with my earlier views, this work is suggesting that many of the long-term unemployed are/have become an economically segmented group. This is noteworthy too, as it implies the problem is not merely initial discrimination:
…even after finding another job, reemployment does not fully reset the clock for the long-term unemployed, who are frequently jobless again soon after they gain reemployment: only 11 percent of those who were long-term unemployed in a given month returned to steady, full-time employment a year later.
I would consider that evidence for a notion of zero marginal product workers. Furthermore, in my view (I am not speaking for the authors here), right now further inflation is as likely to harm as to help these individuals. To ask whether the Fed “should give up” on the long-term unemployed is a biased framing which is more likely to mislead us than anything else.
There is a good piece up at 538:
Krueger and his coauthors, Princeton economists Judd Cramer and David Cho, find evidence that the long-term unemployed aren’t getting jobs even in parts of the country where the job market is comparatively healthy, suggesting that a stronger economic rebound won’t be enough to put them back to work.
Jeff Bezos, The Washington Post, and his plan to take over the media world (speculative)
Remember Sherlock Holmes and the dog which did not bark? WaPo remains very much in the running to be the up-and-coming mega-web site which succeeds. Perhaps the model is a Coasean one:
Much of the media world has been waiting with bated breath since Jeff Bezos bought the Washington Post for $250 million last year, eager to see some sign of the Amazon founder and CEO’s hand at work. The first tangible evidence appeared on Tuesday, when the newspaper announced a major national subscription partnership that will offer free digital access to readers of other newspapers in major U.S. cities.
While this may not be as dramatic as shutting down the printing presses to go web-only, or offering everyone a free Kindle with their subscription, it’s still a fairly dramatic departure from the approach taken not just by the Washington Post but by most newspapers with traditional management.
The partnership — which will see the Post provide free digital access to subscribers of newspapers like The Dallas Morning News, the Minneapolis Star Tribune and the Pittsburgh Post-Gazette — allows the Post to (theoretically at least) build a broader online readership outside of its core subscription area. As the Nieman Journalism Lab notes, the Post effectively ceded the national newspaper market to the New York Times by not launching a national edition, but the partnership could give it a way of achieving the same thing at much lower cost.
One possible model at work here is simply to buy the best content from everyone else, at cut-rate prices, relying on the willingness of outside sources to price discriminate and shed some marginal IP rights for some marginal revenue. Before the rest of the world is fully aware of what is going on, suddenly you have one of the best news web sites.
But wait, doesn’t this article say the Post is giving free access to its content to other newspapers? Here is where Coasean contracting, and symmetry of externalities, enters the picture. WaPo giving free access to the Minneapolis Star-Tribune, or vice versa, end up being pretty much the same thing (over time, with renegotiations) in a world of Coasean contracting. WaPo will end up becoming the hub and the others will be feeder spokes, with Wapo paying a fraction of the cost for the content it receives from each one. (And I suspect there will be no easy “cross-access” of say the Minneapolis paper to the Pittsburgh paper, and so on, to limit the evolution of a rival hub.) Furthermore, at least in the short run, the marketing work is being done by other newspapers, not by WaPo.
Over time the WaPo web site can buy bits of content from Le Monde and FAZ (translated by software programs, of course), The Guardian, The (London) Times, various local U.S. papers, London Review of Books, Boston Review, and who knows where else? Probably only a few outlets, such as WSJ and NYT, will refuse to sell content to them at cut-rate prices. If there is low marginal cost there will be price discrimination, so why not be the one buying on the low part of the demand curve and avoiding most of the costs?
Plus hire a few blogs while you are at it, see how that goes, and maybe over time reel in a few hundred of them. Why not? We’ve already seen some moves in this direction, with The Monkey Cage and Volokh Conspiracy.
How about some music streaming while we are at it?
How about calling it…”Amazon for News”? And for other stuff too. By the way, this hypothesis helps explain why Bezos doesn’t feel any great need to shake up the current WaPo newsroom.
In this model there is a cannibalization effect and the price and value of content end up falling. Does that sound familiar?
Never underestimate how smart really smart people are.
For a further explication of what I take to be the Bezos business model, see my old MR post, “Luring Alex to Lunch,” still one of my favorites and a meditation on whether or not you should produce and write all of your own content. (We don’t, and our model is sustainable.) And thus, sometimes, I manage to lure Alex to lunch. Here is how Alex feels about lunch. That hasn’t changed.
Modeling Vladimir Putin
Here are some options:
1. Putin is a crazy hothead who is not even procedurally rational. Merkel received that impression from one of her phone calls with him.
2. Putin is rational, in the Mises-Robbins sense of instrumental means-ends rationality, namely that he has some reason for what he does. He simply wills evil ends, namely the extension of Russian state power and his own power as well.
3. Putin is fully rational in the procedural sense, namely that he calculates very well and pursues his evil ends effectively. In #2 he is Austrian but in #3 he is neoclassical and Lucasian too. He knows the true structure of the underlying model of global geopolitics.
4. Putin lives in a world where power is so much the calculus — instrumentally, emotionally and otherwise — that traditional means-ends relationships are not easy to define. Power very often is the exercise of means for their own sake and means and ends thus meld and merge. Our rational choice constructs may mislead us and cause us to see pointless irrationality when in fact power is being consumed as both means and end. It is hard for we peons to grasp the emotional resonance that power has for Putin and for some of his Russian cronies. They grew up in the KGB, watched their world collapse, tyrannized to rise to top power, while we sit on pillows and watch ESPN.
Here is a former CIA chief arguing Putin has a zero-sum mentality, though I would not make that my primary framing. Here is Alexander J. Motyl considering whether Putin is rational (Foreign Affairs, possibly gated for you). Here is an interesting and useful discussion of differing White House views of Putin. This account of a several-hour dinner with Putin says he is prideful, resentful of domination, and hardly ever laughs. Here is Eric Posner on Putin’s legal astuteness.
My views are a mix of #2 and #4. He is rational, far from perfect in his decision-making, and has a calculus which we find hard to emotionally internalize. His resentments make him powerful, and give him precommitment technologies, but also blind him to the true Lucasian model of global geopolitics, which suggests among other things that a Eurasian empire for Russia is still a pathetic idea.
Putin is also paranoid, and rationally so. We have surrounded him with NATO. China gets stronger every year. Many other Russians seek to kill him, overthrow him, or put him in prison.
Assumptions about Putin’s rationality will shape prediction. Under #1 you should worry about major wars. With my mix of #2 and #4, I do not expect a massive conflagration, but neither do I think he will stop. I expect he keep the West distracted and seek to turn resource-rich neighbors into vassal states, for the purpose of constructing a power-intensive, emotionally resonant new Russian/Soviet empire, to counter the growing weight of China and to (partially) reverse the fall of the Soviet Union. Even if he does not grok the true model of the global world order, he does know that Europe is weak and the United States has few good cards it is willing to play.
Developing…
Addendum: Whatever your theory of Russians in general may be, watch this one-minute video of a Russian baby conducting and give it a rethink.
The economics of South Ossetia
They are not good, despite high expectations from some of the initial Russian sympathizers:
These days South Ossetia’s economy is entirely dependent on budgetary funds from Russia. Unemployment is high, and so are prices, since goods must now be shuttled in through the tunnel, long and thin like a drinking straw, that cuts through the Caucasus ridge from Russia.
Its political system is controlled by elites loyal to Moscow, suddenly wealthy enough to drive glossy black cars, though the roads are pitted or unpaved. Dozens of homes damaged in the 2008 war with Georgia have never been repaired. Dina Alborova, who heads a nonprofit organization in the South Ossetian capital, Tskhinvali, said her early hopes “all got corrected, step by step.”
The full story is here.
Tesla versus the Rent Seekers
The NYTimes has a very bad article on Tesla and auto dealer franchise laws. The worst bit is this mind blowing contradiction:
…most states have some limits on direct sales by auto manufacturers…These rules are generally meant to ensure competition, so that buyers can shop around for discounts from independent dealers, and to protect car dealers and franchises from being undercut by the automakers.
So there you have it, limits on direct sales ensure competition and protect car dealers from being undercut by the automakers. Sorry, but you can’t have it both ways. Which view is correct? Let’s begin with some background (drawing on a great article by LaFontaine and Morton).
Franchising arose early on in the history of the auto industry because, as in other industries, franchising can take advantage of local knowledge and at the same time control agency costs. Franchising rules evolved in Coasean fashion so that manufacturers could not expropriate dealers and dealers could not expropriate manufacturers. To encourage dealers to invest in a knowledgeable sales and repair staff, for example, manufactures promised dealers exclusive franchise (i.e. they would not license a competitor next door). But with exclusive franchises dealers would have an incentive to take advantage of their monopoly power and increase profits by selling fewer units at higher profits. Selling fewer units, however, works to the detriment of the manufacturer and the public (ala the double marginalization problem (video)). Thus the manufactures required dealers buy and sell a minimum quantity of cars, so-called quantity forcing. Selling more units is exactly what we want a monopoly to do, so these restrictions benefited manufactures and consumers.
Politics, however, began to intrude into this Coasean world in the 1940s and 1950s. Auto sales accounts for some 20% of sales taxes and auto dealers employ a lot of people so when it came to a battle in the state legislatures the auto dealers trumped the manufacturers. The result was franchise laws that were increasingly biased towards dealers. In essence, exclusive franchises became locked into place, manufactures lost the right to add dealers even with population expansion, quantity forcing became illegal and dealer termination became all but impossible.
The result of dealer rent seeking has been higher auto prices for consumers, about 6% higher according to one (older) study by the FTC. Consumers have been stiffed in other ways as well. In some states, for example, manufacturers were required to reimburse dealers for a repair under warranty whatever amount the dealers would have charged consumers for the same repair not under warranty. As a result, dealers had an incentive to increase their price to consumers because that increased what they would be reimbursed for repairs under warranty. The franchise laws have also resulted in a highly inefficient distribution of dealers as populations have moved but dealers have been frozen into place. The inability to close, move or consolidate dealers has impacted the big-3 American firms especially because they have older networks. As a result, a typical GM dealer sells 377 cars a year while a typical Honda dealer sells 1,062 and a Toyota dealer 1,488.
Tesla wants to sell directly to the public but more generally what we need is to restore the Coasean balance, put dealers and manufacturers back on a equal footing and let the market decide the most efficient means of retailing and distributing automobiles.
Addendum: Dan Crane and Lynne Kiesling have further posts on this topic.