Category: Current Affairs

The Georgist equilibrium comes to Greece?

The 63-year-old has been been trying to buy an apartment ever since she was evicted from the home she rented for 32 years – when it was bought by Chinese investors two years ago.

“I want some security in case the same thing happens again,” says Ms Hynes, originally from Ireland. She earns a modest salary as an English teacher, while her Greek husband’s monthly pension was cut from €1,500 (£1,315; $1,690) to €500 during the country’s economic crisis, which began in 2010.

“When we were evicted there were still apartments selling nearby for €100,000. Now I can’t find anything under €250,000. These are Chinese and Russian prices. Not Greek.”

Greece’s financial crisis a decade ago shrank the country’s economy by more than 25% in the following years, but there are finally signs of improvement.

The property market, once completely dead, is on the rise – house prices in Athens rose 3.7% last year…

The boom appears to be driven by a controversial “golden visa” scheme, in which non-EU citizens receive residency and free movement in the EU’s Schengen zone, in exchange for investing in property.

The worry is that foreign investors are benefiting while ordinary Greeks miss out.

Many EU countries including the UK, Portugal and Spain, have golden visa schemes, but Greece has the lowest threshold. Investors receive five-year residency after purchasing €250,000 of property, making the country a new hotspot for foreign buyers.

Here is the full Jessica Bateman BBC story, via Ray Lopez.  Does a culture of renters bring a bohemian, non-complacent dynamic urban core?  Or a bunch of whiners who oppose economic progress?  Or both?

Are the New York subsidies to Amazon really so outrageous?

No, as I explain in my latest Bloomberg column, I do not think New York should have offered Amazon the tax break.  Still, the polemical outrage over this proposed policy seems to me out of hand.  It simply wasn’t that costly, unusual, or unfair.  Here is one bit:

Consider, by way of illustration, entitlement and discretionary spending on the federal level. A program such as Social Security or Medicare is done entirely by formula, as it should be; large companies cannot lobby for higher payments or lower taxes for their workers. Much of discretionary spending, by contrast, is research grants and procurement contracts. One company or researcher wins, and the others do not. Furthermore, the government will usually offer different prices and terms, based on how much value it thinks the winning bidder can bring to the project. All of which is to say: Discretionary spending requires … government discretion.

Viewed in the context, critics of local development subsidies are also critics of government discretion. Or, to frame the issue in a duller way: They do not believe local governments should treat economic development as a procurement problem. That’s a defensible position, but it is not obviously correct.

Another analogy is with private shopping malls, which commonly charge much lower per-unit rents to anchor tenants, maybe even subsidizing them. That is based on the view that a famous retail chain or movie theater can help other businesses in the mall by attracting customers and burnishing the overall image of the place. When a local government offers tax incentives to relocating businesses, it is in a sense acting like a shopping mall, which treats tenant recruitment as a kind of procurement problem. Offering differential rewards to prospective tenants is standard practice.

And note this point about fixed assets:

When a large company is going to make a significant investment in an urban area, it is hoping for support in terms of infrastructure maintenance or improvement, and indeed it invests on that basis. The reality is that municipalities often have difficulty fulfilling their obligations anyway. (This also holds true, unfortunately, for even basic promises to ordinary citizens. Ridden the New York City subway lately?)

In other words, Amazon cannot walk away from NYC the way a street vendor can move to South Carolina and set up a barbecue shop.  So they will be taxed harder ex post, if only in “in kind” terms, namely inferior services for the company and its employees.  The lower tax rate upfront is in large part an offset to this expected time consistency problem.

By the way, Singapore, Singapore, Singapore.  And I thank Garett Jones for the shopping malls point.

Venezuela is in large part the fault of socialism

Here is my Bloomberg column on that topic, excerpt:

…rates of change are important. The Venezuelan figure of about 40 percent [govt. spending/gdp] is up from about 28 percent in 2000, a very rapid increase. By boosting government spending so quickly, the Venezuelan government was sending a message that the key to future riches is courting government favor, not starting new businesses.

Or consider exports, which for most developing economies play an especially critical role. They bring in foreign exchange, provide contacts to foreign markets, and force parts of the economy to learn how to compete with the very best foreign companies. Yet over 90 percent of Venezuela’s exports are oil, and those resources are owned and  controlled by the government. For this all-important growth driver, Venezuela comes pretty close to full socialism — to its detriment.

…nationalizations under Chavez were numerous — encompassing much of the oil sector plus parts of the agriculture, transport, power, steel, telecommunications and finance industries. Even though many of those nationalizations were small in scale, the threat of further encroachments on private property rights discouraged investment and sent the wrong signal about where the nation was headed.

There is much more at the link, including a discussion of the all-important dimension of ideas.  And here is the essential Kevin Grier on Venezuela.

Amazon and taxes: a simple primer

The main reason Amazon as a corporate entity does not pay much in taxes is because the company so vigorously reinvests its profit.  The resulting expensing provisions lower their tax liabilities, in some cases down to zero or near-zero.  That is in fact the kind of incentive our tax system is supposed to create, and does so only imperfectly, noting that many economists have suggested moving to full expensing.

(NB: You can’t hate both share buybacks and profit reinvestment!)

Amazon pays plenty in terms of payroll taxes and also state and local taxes.  Nor should you forget the taxes paid by Amazon’s employees on their wages.  Not only is that direct revenue to various levels of government, but the incidence of those taxes falls somewhat on Amazon, which now must pay higher wages to offset the tax burden faced by their employees.  Not everyone wants to live in NYC or Queens!  (Do you agree with Paul Krugman’s charge that the Trump tax cuts are mainly a giveaway to capital?  If so, you probably also should believe that the wage taxes paid by Amazon employees fall largely on capital.)

There is no $3 billion that NYC gets to keep if Amazon does not show up.  That “money” was a pledged reduction in Amazon’s future tax burden at the state and local level.

When it comes to the discussion surrounding Amazon and taxes, I can only sigh…

RadicalXChange, March 22-24

Robert Wiblin of 80,000 hours has an excellent podcast with Glen Weyl on Radical institutional reforms that make capitalism & democracy work better. Weyl’s diagnosis of the problems of capitalism and democracy strike me as wrongheaded but on the other hand his solutions are interesting.and original. Wiblin does a good job of gently but decisively pushing back in places, e.g. in the discussion of high modernism.

RadicalXChange is hosting a big conference March 22-24 in Detroit. In addition to Weyl, speakers include Vitalik Buterin, Margaret Levi and Zooko Wilcox among others. I will be talking about open borders and also about city development on a panel with Devon Zuegel, Mwiya Musokotwane and Mark Lutter.

What will Singapore do with its NIRC?

‘NIRC’ – it’s a uniquely Singaporean economic abbreviation that stands for net investment returns contribution…

The total size of Singapore’s total reserves is a state secret, but estimates by most analysts put it at well above S$500 billion (US$370 billion)…

The Temasek Holdings chief executive wrote about how returns from the firm she leads, as well as GIC Private Limited, and the foreign reserves held by the central bank were the “single largest contributor” to the Singapore budget.

“Without tapping on the dividends or returns from GIC, [the Monetary Authority of Singapore], and Temasek, the government would have had to raise taxes long ago for social spending,” Ho wrote.

Without the NIRC, the Pioneer Generation Package – a S$9 billion programme unveiled in 2014 to help cover the health care costs of citizens born before 1949 – would probably have been funded by “higher taxes or cuts to other essential programmes”, according to Ho.

Here is the full story, via a loyal MR reader.  If you wish to understand Singapore’s relatively low rates of taxation, you also need to understand NIRC.  Here is my earlier post Singapore as financial corporation.

Do most Americans not want to live near tall buildings?

Here is an email I received from James Liu:

I think metropolitan geography was underdiscussed in the Amazon-NYC breakup. If you look at the Seattle, DC, and NYC areas, the main-city–secondary-city dynamic explains quite a bit.

Apparently, Americans don’t like living near tall buildings. In DC, the tall buildings were banished to the suburbs, and so it seems not unsuitable for a 25,000 person office campus to be built in Crystal City. In NYC, the tall buildings have been banished to Manhattan. When I lived in Brooklyn, they were planning the complex where the Nets would wind up. I watched a great deal of rage about plans to have 30-story buildings put up in downtown Brooklyn. This even though Brooklyn was a city of a million people but had fewer towers than, say, Milwaukee, or Jersey City, or take your pick. The argument was that tall buildings were appropriate for Manhattan, but not Brooklyn.

And in the Seattle metro, there is a cluster of tall buildings in Bellevue, just across a lake from Seattle, which is home to some tech firms (Zillow, Expedia, companies you’ve heard of). I don’t know how the city government was prevailed upon to allow it, but anyway it is there. I don’t think Amazon has much presence there, but Microsoft does, I think to compete with Amazon for transit-preferring workers. In some ways, Bellevue is like a bridge-and-tunnel borough more than it is like a suburb (Jersey City is a borough too, in that sense). Those who prefer to see it that way call Seattle the West Side and Bellevue (maybe Bellevue/Kirkland/Redmond) the East Side.

So it was not beyond imagining by a Seattle company that it was possible to build a tech campus in an outer borough. I don’t know how in the world NY’s city government would have imagined that such a thing was possible. Perhaps because De Blasio drives to work. A subway mayor like Bloomberg or Koch would have insisted on Hudson Yard. And New York would still have an HQ2.5. But that is another story for another email.

Words of wisdom

Amazon will pay property tax on its new Long Island City offices. It will pay corporate tax — not just on its profits, but on its capital base. Its employees, especially highly paid ones, will pay the city’s personal income tax. Those taxes, of course, will be somewhat offset by the incentives that the city has promised the company — up to $2 billion, depending on how many people the company hires and how many facilities it builds. Those incentives were a wasteful way to attract corporate investment. But in the long run, the tax revenue New York City gets from HQ2 will probably far exceed the cost.

That is from Noah Smith at Bloomberg.  The “will” needs to be changed, otherwise right on target…

Amazon winners and losers

WINNERS:

Virginia Governor Ralph Northam: He did a good job on the first Amazon deal for Virginia, and now can try to lure more of the company here.  There is a new reason to keep him in office and also to start paying attention to a different issue.

Nashville and the Southeast more generally: That part of the country has fewer local NIMBY activists and is less likely to elect figures such as AOC.  Texas too.  Is it possible that I live in the sanest part of the country?  Wouldn’t that be funny?

The Bay Area: NYC is no longer such a fierce competitor at the macro level, with the potential to become the new center of gravity for the tech world.  The Bay Area can breathe a bit more easily now, at least as long as clustering remains the name of the game.  Yet this one is double-edged, because it also means the Bay Area has less incentive to solve its rather pressing problems and dysfunctions.

Valentine’s Day: It will be used to announce more dramatic break-up events, and thus become all the more emotionally fraught, in both positive and negative directions.

Hoboken and Jersey City: They are nicer than Manhattan anyway and with better day-to-day food options, right?  Right?  Queens won’t be obviously outcompeting them as a home for a new, high-quality business site.

Regional development subsidies: It was awfully easy for Amazon to walk away from this “deal.”  Expect to see higher subsidies and tighter deals in the future.

LOSERS:

Queens: Most of the residents wanted the project to come.

Amazon: The company will find it harder to access the top talent of New York City, and the top talent that is willing to live in New York City.  Let’s hope this is a blessing in disguise, and a new path toward discovering hitherto untapped sources of talent.

New York City: Yes, Google is expanding in Chelsea but more and more NYC is becoming a city of finance and tourism and restaurants.  Can a location have the Dutch disease and cost disease at the same time?  Stay tuned to find out.

YIMBYs: One of the world’s most valuable, efficient, and also popular companies could not make stick a deal to expand and create tens of thousands of high-paying jobs and pay more taxes.  What hope do the rest of us have?

Seven lessons about blackmail

That is the title of my latest Bloomberg column, here is the opening bit:

Every now and then, a few apparently random news events come together and influence how you see the world. My most recent lesson is that blackmail and blackmail risk are a lot more common than I had thought.

And:

…the main villains in these privacy losses are not the big internet companies. While it is murky exactly how the Bezos photos leaked, it seems to have involved old-fashioned spying and the interception of text messages (and possibly a renegade brother). Silicon Valley didn’t sell his data. As for Northam, the yearbook is from the pre-digital era, dug up in a school library. This information was not on the internet, though of course it did play a role in spreading it.

Third, billionaires can be pretty useful. As Bezos asked in his open letter on Medium: “If in my position I can’t stand up to this kind of extortion, how many people can?” In this case, both the billionaire and the medium of communication are the good guys.

Fourth, fears of a new era of blackmail based on Photoshopped images and so-called deep fakes (phony but convincing video) may be overblown, or at least premature. In the cases of both Bezos and Northam, the authenticity of the source material (text messages and photos) is not really being questioned, and both stories are receiving intense scrutiny. Rather, the debate is over the provenance and significance of the information.

There is much more at the link.

My Conversation with Jordan Peterson

Here is the transcript and audio, here is the summary:

Jordan Peterson joins Tyler to discuss collecting Soviet propaganda, why he’s so drawn to Jung, what the Exodus story can teach us about current events, his marriage and fame, what the Intellectual Dark Web gets wrong, immigration in America and Canada, his tendency towards depression, Tinder’s revolutionary nature, the lessons from The Lord of the Rings and Harry Potter, fixing universities, the skills needed to become a good educator, and much more.

Here is one bit:

COWEN: Your peers in the Intellectual Dark Web — the best of them — what is it they’re wrong about?

PETERSON: Oh, they’re wrong about all sorts of things. But at least they’re wrong in all sorts of interesting ways. I think Sam Harris, for example — I don’t think that he understands. I don’t think that he’s given sufficient credence to the role that religious thinking plays in human cognition.

I think that’s a huge mistake for someone who’s an evolutionary biologist because human religious thinking is a human universal. It’s built into our biology. It’s there for a reason. Although Sam is an evolutionary biologist, at least in principle, with regards to his thinking, he’s an Enlightenment rationalist when it comes to discussing the biology of religion, and that’s not acceptable.

It’s the wrong time frame. You don’t criticize religious thinking over a time frame of 200 years. You think about religious thinking over a time frame of 50,000 years, but probably over a far greater time span than that.

COWEN: So if that’s what Sam Harris doesn’t get —

PETERSON: Yeah.

COWEN: If we turn to senior management of large American companies, as a class of people — and I know it’s hard to generalize — but what do you see them as just not getting?

PETERSON: I would caution them not to underestimate the danger of their human resources departments.

Much more than just the usual, including a long segment at the end on Jordan’s plans for higher education, here is one bit from that:

Universities give people a chance to contend with the great thought of the past — that would be the educational element. To find mentors, to become disciplined, to work towards a single goal. And almost none of that has to do with content provision. Because you might think, how do you duplicate a university online? Well, you take lectures and you put them online, and you deliver multiple-choice questions. It’s like, yeah, but that’s one-fiftieth of what a university is doing.

So we’ve just scrapped that idea, and what we’re trying to do instead is to figure out, how can you teach people to write in a manner that’s scalable? That’s a big problem because teaching people to write is very, very difficult, and it’s very labor intensive and expensive. So that’s one problem we’d really like to crack. How can you teach people to speak? And can you do that in a scalable manner as well?

Definitely recommended, even if you feel you’ve already heard or read a lot of Jordan Peterson.

Life without the Export-Import Bank

In terms of total revenue, Boeing, the aerospace giant, had its best year ever in 2018, with worldwide sales of $101.1 billion.

Exports were particularly robust. Commercial jet deliveries to foreign airlines rose from 763 in 2017 to 806 last year. Overall, the company has a 5,900-order backlog for airplanes worth a staggering $412 billion, according to The Post last week…

For the past 3½ years, Ex-Im, as the trade-finance agency is known, has been essentially paralyzed, yet Boeing has gone from strength to strength…

In the end, Ex-Im survived, as a legal entity. Crucially, though, Senate Republican foes of the bank refused to confirm a quorum for the bank’s board; without a quorum, Ex-Im cannot approve loan transactions larger than $10 million.

As a result of this ploy, the bank has been unable to aid foreign sales of Boeing or other makers of big-ticket goods since June 2015.

And yet, in that time, Boeing has done awesomely well.

It’s not just Boeing that has survived or thrived during Ex-Im’s paralysis. Another company that received heavy Ex-Im support, construction-equipment-maker Caterpillar, achieved a record profit per share in 2018. Caterpillar’s outlook for 2019 is somewhat less rosy, due to broad economic factors such as the slowdown in China, but Ex-Im, or the lack thereof, hardly registers in analyst forecasts.

Here is more from Charles Lane.

What does a Twitter-driven politics look like?

That is the topic of my latest Bloomberg column, here is the final bit:

But what does this new, more intense celebrity culture mean for actual outcomes? The more power and influence that individual communicators wield over public opinion, the harder it will be for a sitting president to get things done. (The best option, see above, will be to make your case and engage your adversaries on social media.) The harder it will be for an aspirant party to put forward a coherent, predictable and actionable political program.

Finally, the issues that are easier to express on social media will become the more important ones. Technocratic dreams will fade, and fiery rhetoric and identity politics will rule the day. And if you think this is the political world we’re already living in, rest assured: It’s just barely gotten started.

Buy (or Rent) Coal! The Coasean Climate Change Policy

Since climate change and what to do about it are in the news it’s time to re-up an underrated idea, buy coal! Carbon taxes increase the price of carbon and induce economic and technological substitution towards lower-carbon sources of fuel in the countries that adopt them. As carbon-tax countries reduce fuel use, however, non carbon-tax countries see the price of their fuel decline. Thus, unless all countries join the tax-coalition, there is leakage. Supply-side policies are an alternative to demand supply policies. The United States, for example, could buy out and close coal mines, including giving the workers substantial retirement/reallocation bonuses, thus reducing the world supply of coal which is still the largest source of C02 emissions.

You can get rich by hitting an oil gusher, but coal is relatively expensive to mine and to transport. Thus, it’s relatively cheap to buy out coal mines because you aren’t buying the coal, you’re buying the right to leave the coal in the ground. Cutting the supply of coal raises its price which will increase the quantity supplied in other countries. Thus, there is the potential for supply leakage as well as demand leakage. It’s probably easier to use more coal when the price of coal falls (electricity, for example, can be generated in a variety of ways) than it is to mine more coal when the price rises. In other words, the elasticity of the demand for coal is greater than the elasticity of supply so supply leakage is probably less than demand leakage. Furthermore, supply leakage can be handled by buying out supply in the non-coalition countries. As Noah Smith pointed out with the graph at right (data) US CO2 emissions are actually falling while the rest of the world keeps rising (as they catch up in per-capita terms) so addressing the CO2 emissions problem requires bringing countries like China and India on board.

Coal use in China is very high and increasing. India has been canceling coal plants as solar becomes cheaper but coal is still by far the largest source of power in India. Thus, there is plenty of opportunity to buy out, high-cost coal mines in China and India.

It might seem odd to buy Chinese and Indian coal mines but we buy Chinese and Indian labor, why not a coal mine? Moreover, it’s important to understand that the policy is to buy only up to the point that it benefits both parties. Buying coal isn’t foreign aid, it’s a pollution reduction plan just like a carbon tax or R&D investment and because we can buy barely-profitable coal mines and avoid the problem of leakage this is a low-cost method to reduce CO2 emissions.

Collier and Venables worry that foreign voters won’t like foreign investors buying up coal mines, although foreign investment is hardly uncommon and foreigners do protect rainforests by buying the right to cut them down. In any case, Collier and Venables suggest a cap-extract and trade program. Under cap-extract there is a cap on global extractions of carbon (not use) but rights to extract can be traded. Since it’s more valuable to extract say oil than coal what this would mean is that payments would flow from mostly developed countries to developing countries which makes it clear that we are all in the boat together.

Even without a cap-extract and trade program, however, there are other factors that make buying coal attractive to people in selling countries, namely coal is killing them even putting aside the dangers of climate change.

NYTimes: Burning coal has the worst health impact of any source of air pollution in China and caused 366,000 premature deaths in 2013, Chinese and American researchers said on Thursday.

Coal is responsible for about 40 percent of the deadly fine particulate matter known as PM 2.5 in China’s atmosphere, according to a study the researchers released in Beijing.

India’s air quality is even worse than China’s and is responsible for some 1.2 million early deaths annually. A 25% cut in pollution in India could increase life-expectancy by 1.3 years and in some highly polluted cities such as Delhi by 2.8 years. Not all pollution comes from coal but a substantial amount does.

Buyers might worry that a foreign government will take their money and later renege on the deal. There are lots of ways to deal with this problem–turn the coal fields into a national park, for example, or develop them for housing. But let’s turn a problem into a solution. Instead of buying coal, we could rent it. In other words, buy the right to delay mining the coal for say 10 years. Given the rate of improvement in solar, many coal plants will be uneconomic in 10 years and given the rate of improvement in living standards and the consequent increased demand for clean air, many coal plants in India and China could well be unpolitical in 10 years. Thus, it is true that some solutions are naturally in the offing, but for exactly this reason some coal plants are going to be working extra hours in the next decade to squeeze out what profit they can while they still can. We can avoid this last push of CO2 into the atmosphere by buying up the right to extract and holding it for a decade.

A program to leave coal in the ground could easily pay for itself in lives saved and climate stabilized.

The policing culture that is China

Short-video app TikTok has a reputation for being beloved by young people the world over, but it’s also surprisingly popular with Chinese police officers.

In early January, China Police Network, a news portal run by the Ministry of Public Security, announced that 175 new TikTok channels had been created by police stations, SWAT teams, traffic police, and prisons in the month of December, bringing the country’s grand total to nearly 1,200 such accounts. That month, they churned out over 13,000 videos attracting a combined 4.8 billion views.

Since June of last year, China Police Network has kept a monthly tally of the most popular law enforcement accounts and videos on TikTok — or Douyin, as it’s known in China. While police in other countries have plugged into social media and cultivated fan followings on platforms like Instagram and Facebook, their Douyin-loving counterparts in China stand out in terms of scale and the wide range in both quality and content of their videos.

The January post mentions a comedic clip made by an account called Shishou Public Security that received over 800,000 likes. The video depicts a middle-aged woman tearfully describing her myriad contributions to the economic empowerment of women as mournful music plays in the background — before the camera flips to police officers unmasking her as the madame of a brothel.

The article also congratulates Siping Police Affairs for becoming the first police account in China to eclipse 10 million followers and praises the success of police hashtag campaigns such as #SayNoToDrunkDriving.

Since its launch in China in September 2016 and its expansion to international markets as TikTok a year later, Douyin boasts around 800 million downloads worldwide. The platform’s premise is simple: Users create and share 15-second videos, some of which wind up going viral. The police presence on Douyin has yielded a manic mix of content, from humdrum notices of arrests and other official business to reposts of pandas at play to original comic sketches with didactic denouements.

Here is more from Kenrick Davis at Sixth Tone.