Category: Current Affairs

Culture splat (a few broad spoilers)

Challengers is a good and original movie.  Imagine a 2024 rom com, except the behavior and conventions actually are taken from 2024, and with no apologies.  The woman says the word “****ing” a lot, and no one treats this as inappropriate or unusual.  There is bisexuality and poly.  Society is feminized.  Of course opinions will differ on these cultural issues, but the movie is made with conviction and so it is truly a tale of modern romance.  Who in the movie is in fact the emptiest shell?  Opinions will differ.

Zendaya dominates the screen  — for how long has it been since we have had an actress this central and this charismatic?

Also, I quite like the new Beyonce album, and Metaculus estimates the chance of an H5N1 pandemic at about two percent.

The Prisoner’s Dilemma of Non-Competes

I agree with Tyler, that the FTC ban on non-competes is overly broad and not tailored to fields where the drawbacks outweigh the benefits. Additionally, the FTC’s authority to enact this rule, rather than Congress, is questionable.

Nevertheless, I don’t think banning non-competes is without merit. The reason is not the standard Twitter-econ view that non-competes are bad for workers. Indeed, some non-competes, so-called “gardening leave”, pay the worker during the non-compete period. Sounds pretty good! More generally, non-competes are just one item in the wage bargain like hours, health and pension benefits. As a result, the FTC is quite wrong to think that banning non-competes will raise wages–the most immediate effect will be to reduce wages. Indeed, more workers will be willing to work at lower wages precisely to the extent that non-competes were a burden. Can’t have it both ways. Instead of being bad for workers, my skepticism about non-competes is that they are bad for industry.

The problem with non-competes is that every firm wants non-competes on the workers it fires but no firm wants non-competes on the workers it hires. However, firms only control the terms on which they hire workers so it’s possible for each firm acting in its self-interest to create a situation which is in the interests of none. Or, to put it differently, firms may approve of the decision to ban non-competes because it’s a package deal, firms can’t restrict their own former employees but they gain the ability to recruit freely from competitors.

More generally, worker mobility often carries externalities. As I wrote earlier, ideas are in heads and if you don’t move the heads, often the ideas don’t move either. The innovation that results from mobility is a public good. Non-competes are a type of intellectual property, call it intellect property. Once again, firms want to lock up their intellectual property but they also want to use ideas from other firms. Firms only control the former decision not the latter so IP in general has a prisoner’s dilemma issue which is one reason IP in the US is too strong (see the Tabarrok Curve) and non-competes are part of that package. Ultimately, if the innovation effects are important, wages could rise but those effects would be for more or less all workers not specifically for those with non-competes.

Governments aren’t good at the fine details of optimizing IP so perhaps a heavy-handed approach is the best we can expect. Non-competes also aren’t a huge issue for most firms, even firms that use them, so given the above I am willing to give the experiment a try.

Decoupling from China?

Maybe, but maybe not:

Amid the current U.S.-China technological race, the U.S. has imposed export controls to deny China access to strategic technologies. We document that these measures prompted a broad-based decoupling of U.S. and Chinese supply chains. Once their Chinese customers are subject to export controls, U.S. suppliers are more likely to terminate relations with Chinese customers, including those not targeted by export controls. However, we find no evidence of reshoring or friend-shoring. As a result of these disruptions, affected suppliers have negative abnormal stock returns, wiping out $130 billion in market capitalization, and experience a drop in bank lending, profitability, and employment.

That is from the NY Fed, by Matteo Crosignani, Lina Han, Marco Macchiavelli, and André F. Silva.  Via RH.

Why a Housing Shortage Exists Despite More Houses Per Person

When I post about the skyrocketing price of housing and the need to build, commentators (include some of the most astute commentators on MR), will sometimes object by pointing to the increasing and historically high number of houses per capita. They question how this aligns with rising prices and wave vaguely towards factors like monopoly pricing, hedge funds, Airbnb, vacancies and so forth, implying that more construction isn’t the solution. The real explanation for rising prices amid greater homes per capita is actually quite simple, fewer kids. Kevin Erdmann has an excellent post on this going through the numbers in detail. I will illustrate with a stylized example.

Suppose we have 100 homes and 100 families, each with 2 parents and 2 kids. Thus, there are 100 homes, 400 people and 0.25 homes per capita.  Now the kids grow up, get married, and want homes of their own but they have fewer kids of their own, none for simplicity. Imagine that supply increases substantially, say to 150 homes. The number of homes per capita goes up to 150/400 (.375), an all time high! Supply-side skeptics are right about the numbers, wrong about the meaning. The reality is that the demand for homes has increased to 200 but supply has increased to just 150 leading to soaring prices.

Now what do we do about this? One response is to blame people’s choices–immigrants are buying all the houses, hedge funds are buying all the houses, tourists are renting all the houses, everyone should want less and conserve more! Going down this path will tear the country apart. The other response is the American way, in the words of Bryan Caplan’s excellent new book, build, baby, build!

Here’s Kevin:

We are already 15 years into a cultural and economic battle that is so important, it turned the direction of adults per house upward for, likely, the first time since the start of the industrial revolution. Fifteen years in, by that measure, we have reversed economic progress by nearly 40 years. There is so much ground we have to make up. And, also, the reactionary position will have to continue to dig deeper and get worse – rounding up immigrants, blaming the homeless, stoking fear and distrust of financial institutions. I’m sorry if I’m sounding too shrill. It all happens in slow motion around us, so we adapt to the new normal. But the tent encampments in all the urban parks are a long way from what should be considered normal. We are already deeply into a cultural battle. And you can see that it is a cultural battle, because it is difficult to simply establish a plurality of support to admit obvious things.

If this continues, it will destroy the fabric of mutual trust that has managed to miraculously hold this country together for 250 years. The challenge is to open the eyes of enough victims of these policy choices that 50%+1 of the country can address it on the empirical level rather than the aesthetic level, and to stop this devolution before it gets worse.

Hat tip: Naveen.

U.S.A. fact of the day

Latin American immigrants are starting businesses at more than twice the rate of the U.S. population as a whole.

The jump in Latino entrepreneurship has driven up the overall share of new businesses owned by immigrants, who accounted for 36% of launches last year compared with 25% in 2019, according to a new analysis of Census Bureau data. New-business creation by white and native-born Americans has slowed in the past two years, following a broad surge early in the pandemic.

Here is more from the WSJ.

The Ludwig von Mises comeback

That is the subject of my latest Bloomberg column.  Here is one excerpt:

The Austrian economist Ludwig von Mises is having a moment, especially in Latin America. Argentine President Javier Milei admires Mises, and he has adopted some Misesian ideas, such as the notion that “the middle of the road leads to socialism.” Milei used to be an academic economist and knows the ideas of Mises well.

More colorfully, on Saturday the Brazilian UFC fighter Renato Moicano delivered an on-camera polemic (warning: audio in link NSFW) in praise of Mises and defending free speech and private property. His impromptu lecture pointed listeners to Mises and what he called the six lessons of the Austrian School of Economics, as well as his forthcoming podcast. Those lessons — as well as a G-rated version of Moicano’s economics lecture, and a Mises-inspired speech on business-cycle theory by President Nayib Bukele of El Salvador — are available on the website of the (US-based) Mises Institute.

And this:

Meanwhile, among free-market types, the vibes have shifted in a way that has boosted the influence of Mises. For a comparison, the ideas of Friedrich A. Hayek were ascendant in classical liberal circles during the 1990s, in part because Hayek had won a Nobel Prize. Hayek’s writing style was also more gentle, while Mises was uncompromising. As Hayek said about Mises’s book on socialism, published in 1922: “At first we all felt he was frightfully exaggerating and even offensive in tone.”

Milton Friedman was another great economic thinker of the 20th century, and he was renowned for always smiling and never losing his temper at his intellectual opponents. Friedman wrote a book called Capitalism and Freedom. Hayek’s was called The Constitution of Liberty. Mises, meanwhile, was producing books with titles such as Omnipotent Government and The Anti-Capitalist Mentality. He was the one of that troika who allied himself with Ayn Rand.

Today, however, many of Mises’s proclamations no longer sound as outdated as they might have a few decades ago. In his treatise Human Action, he was fond of stressing “Man Acts” as a fundamental principle of economic and social analysis. Whatever that might have meant at the time, these days I would not be surprised to find a comparable phrase in a Jordan Peterson book. Indeed, Peterson recently expressed his admiration for Moicano’s endorsement of Mises.

Finally:

As for Latin America, Mises may be just the kind of market-oriented thinker the region needs. Polemics do sometimes cut through the obfuscations of political discourse. Friedman and Hayek’s generosity toward their opponents is perhaps not the best strategy for the notoriously brutal politics of Latin America. And some of Mises’s more impolite notions — such as the idea that economic policy can simply become worse and worse over time — seem to be proving out in countries such as Brazil, which has been mostly stagnant for a long time now.

Worth a ponder.

A portrait of Portugal

…at least half of a population of ten million depend on the state in some way—35% are retirees, 10% government workers, and another 5% receive either unemployment benefits or integration benefits. They would see a country with less youth than they once saw; they would see what is in fact, after Italy, the second-oldest country in Europe, with 23% of the population being older than 65. And they would further see that like so many other democratic and less democratic countries, Portugal is having elections and that this election will, once again, pit the country’s aging population against its young people.

So-called “seniors” are reliable voters, while young people aren’t, and so this perverse incentive ensures that seniors vote, effectively, to extract rent for themselves from young people through the state. This is reflected in voting intentions: people over 54 are disproportionately likely to vote for the Socialist Party, while those who are under 25 are disproportionately unlikely to vote for it.

One in three people ages 15-39 has left for overseas.  Here is more from Vasco Queirós, via The Browser.

The Culture that is Germany

FT: When it launched its fully automated stores four years ago, Germany’s regional supermarket chain Tegut billed the experiment as a window into the future of shopping. But the Fulda-based retailer has since been embroiled in a legal fight over a centuries-old principle enshrined in the German constitution: Sunday rest. Be they robotic or staffed by humans, most shops in Germany are not allowed to open on the last day of the week — and courts have upheld that ban.

You are probably thinking this is a Baptists and Bootleggers story but actually it’s a Baptists, Catholics and Bootleggers story.

Both the Protestant and Catholic Churches have formed an unusual alliance with Germany’s powerful unions to defend the status quo for years, and spearheaded the campaign against the Sunday opening of automated stores. In March, the alliance encouraged pastors to criticise the shops in their weekly sermons.

No word yet on whether the 8-hour day or bathroom breaks will also apply to robots. You will note that MR has posted on Sundays for over 20 years.

Zimbabwe launches new gold-backed currency

Zimbabwe has introduced a new gold-backed currency called ZiG – the name stands for “Zimbabwe Gold”.

It is the latest attempt to stabilise an economy that has lurched from crisis to crisis for the past 25 years.

Unveiling the new notes, central bank governor John Mushayavanhu said the ZiG would be structured, and set at a market-determined exchange rate.

The ZiG replaces a Zimbabwean dollar, the RTGS, that had lost three-quarters of its value so far this year.

Annual inflation in March reached 55% – a seven-month high.

Zimbabweans have 21 days to exchange old, inflation-hit notes for the new currency.

However, the US dollar, which accounts for 85% of transactions, will remain legal tender and most people are likely to continue to prefer this…

He committed to ensuring that the amount of local currency in circulation was backed by equivalent value in precious minerals – mainly gold – or foreign exchange, in order to prevent the currency losing value like its predecessors.

Here is the full story, file under “less than fully credible.”  That said, I do think that many of the important monetary innovations of the future are likely to come in Africa.

Your Subsidies are Undercutting My Subsidies!

NYTimes: Treasury officials say that they fear that elevated Chinese production targets are causing its firms to produce far more electric vehicles, batteries and solar panels than global markets can absorb, driving prices lower and disrupting production around the world. They fear that these spillovers will hurt businesses that are planning investments in the United States with tax credits and subsidies that were created through the Inflation Reduction Act of 2022, a law that is pumping more than $2 trillion into clean energy infrastructure.

Amazing that Yellen can say this with a straight face:

as an economist, it was her view that China could benefit if it stopped giving subsidies to firms that would fail without government support.

My contentious Conversation with Jonathan Haidt

Here is the transcript, audio, and video.  Here is the episode summary:

But might technological advances and good old human resilience allow kids to adapt more easily than he thinks?

Jonathan joined Tyler to discuss this question and more, including whether left-wingers or right-wingers make for better parents, the wisest person Jonathan has interacted with, psychological traits as a source of identitarianism, whether AI will solve the screen time problem, why school closures didn’t seem to affect the well-being of young people, whether the mood shift since 2012 is not just about social media use, the benefits of the broader internet vs. social media, the four norms to solve the biggest collective action problems with smartphone use, the feasibility of age-gating social media, and more.

It is a very different tone than most CWTs, most of all when we get to social media.  Here is one excerpt:

COWEN: There are two pieces of evidence — when I look at them, they don’t seem to support your story out of sample.

HAIDT: Okay, great. Let’s have it.

COWEN: First, across countries, it’s mostly the Anglosphere and the Nordic countries, which are more or less part of the Anglosphere. Most of the world is immune to this, and smartphones for them seem fine. Why isn’t it just that a negative mood came upon the Anglosphere for reasons we mostly don’t understand, and it didn’t come upon most of the rest of the world? If we’re differentiating my hypothesis from yours, doesn’t that favor my view?

HAIDT: Well, once you look into the connections and the timing, I would say no. I think I see what you’re saying now, but I think your view would say, “Just for some reason we don’t know, things changed around 2012.” Whereas I’m going to say, “Okay, things changed around 2012 in all these countries. We see it in the mental illness rates, especially of the girls.” I’m going to say it’s not just some mood thing. It’s like (a), why is it especially the girls? (b) —

COWEN: They’re more mimetic, right?

HAIDT: Yes, that’s true.

COWEN: Girls are more mimetic in general.

HAIDT: That’s right. That’s part of it. You’re right, that’s part of it. They’re just much more open to connection. They’re more influenced. They’re more subject to contagion. That is a big part of it, you’re right. What Zach Rausch and I have found — he’s my lead researcher at the After Babel Substack. I hope people will sign up. It’s free. We’ve been putting out tons of research. Zach has really tracked down what happened internationally, and I can lay it out.

Now I know the answer. I didn’t know it two months ago. The answer is, within countries, as I said, it’s the people who are conservative and religious who are protected, and the others, the kids get washed out to sea. Psychologically, they feel their life has no meaning. They get more depressed. Zach has looked across countries, and what you find in Europe is that, overall, the kids are getting a little worse off psychologically.

But that hides the fact that in Eastern Europe, which is getting more religious, the kids are actually healthier now than they were 10 years ago, 15 years ago. Whereas in Catholic Europe, they’re a little worse, and in Protestant Europe, they’re much worse.

It doesn’t seem to me like, oh, New Zealand and Iceland were talking to each other, and the kids were sharing memes. It’s rather, everyone in the developed world, even in Eastern Europe, everyone — their kids are on phones, but the penetration, the intensity, was faster in the richest countries, the Anglos and the Scandinavians. That’s where people had the most independence and individualism, which was pretty conducive to happiness before the smartphone. But it now meant that these are the kids who get washed away when you get that rapid conversion to the phone-based childhood around 2012. What’s wrong with that explanation?

COWEN: Old Americans also seem grumpier to me. Maybe that’s cable TV, but it’s not that they’re on their phones all the time. And you know all these studies. If you try to assess what percentage of the variation in happiness of young people is caused by smartphone usage — Sabine Hossenfelder had a recent video on this — those numbers are very, very, very small. That’s another measurement that seems to discriminate in favor of my theory, exogenous mood shifts, rather than your theory. Why not?

Very interesting throughout, recommended.  And do not forget that Jon’s argument is outlined in detail in his new book, titled The Anxious Generation: How the Great Rewiring of Childhood is Causing an Epidemic of Mental Illness.

Build Back Key Bridge Better

The collapse of the Key Bridge is a national disaster but also an opportunity for societal advancement. We must rebuild but in doing so we must also address the historical discrimination faced by workers in Baltimore and beyond. Ensuring the participation of Baltimore’s workforce in the reconstruction project is essential. It’s Baltimore’s bridge and in rebuilding we must actively engage and employ a diverse pool of local talent, reflecting the city’s rich cultural tapestry. We can Build Back Better by providing meaningful, well-paying jobs to those who have been historically marginalized, fostering economic growth and equity within the community.

Furthermore, offering accessible, quality day care for workers will directly contribute to an equitable working environment, enabling parents and guardians to participate fully in the reconstruction effort without the burden of child care concerns. We must reject the idea that equity and productivity are at odds. A more inclusive workforce is a more productive workforce.

American workers are the most productive in the world thus to Build American we must Buy American. Reconstruction of the Key Bridge is not just a matter of national pride but also an essential strategy for growing our economy. By prioritizing American materials and labor, we invest in our communities, support local industries, and ensure that the economic benefits of the reconstruction project are felt widely, especially in areas hardest hit by economic challenges.

We can build back better. We must build back better. By engaging Baltimore workers in Baltimore’s bridge we can rectify long-standing discrimination. By providing accessible child care, and adhering to “Buy American” rules we can build America as we build America’s bridge. Building back better is not simply about building physical infrastructure. It’s about building a bridge to the future. A bridge of progress, equality, and unity, symbolizing our collective commitment to a future where every individual has the opportunity to thrive.

Addendum: April 1, 2024.