Category: Economics
Google and Verizon and net neutrality
I found this excerpt from Reihan to be persuasive:
I’ll just note that Google official line on wireless net neutrality, as stated by Richard Whitt, sounds fairly persuasive. Why insist on net neutrality regulations for wireline but not for wireless services?
First, the wireless market is more competitive than the wireline market, given that consumers typically have more than just two providers to choose from. Second, because wireless networks employ airwaves, rather than wires, and share constrained capacity among many users, these carriers need to manage their networks more actively. Third, network and device openness is now beginning to take off as a significant business model in this space.In our proposal, we agreed that the best first step is for wireless providers to be fully transparent with users about how network traffic is managed to avoid congestion, or prioritized for certain applications and content.
I believe in legally mandated net neutrality when monopoly is present, as with many cable providers, but not with wireless. Here is my previous post on net neutrality. Here are Robert Litan and Hal Singer, defending the Google-Verizon arrangement.
All the king’s horses and all the king’s men…
Here is another factor behind the recent German economic success:
A vast expansion of a program paying to keep workers employed, rather than dealing with them once they lost their jobs, was the most direct step taken in the heat of the crisis.
There is much more of interest here. I would describe this as a major, still uninternalized lesson of the recent crisis, with its roller coaster-rapid dips. In a highly specialized modern economy, it is much easier to prevent jobs from being destroyed than to create them again, at least assuming those are "good" jobs in the first place. (Yes, people thought they knew this but it's an even stronger difference than had been believed.) The U.S. auto bailout, for instance, worked better than did most of the stimulus program. Most of the Austrians would disown this point, but you can pull it right out of Lachmann's Capital and its Structure.
We should have cut the payroll tax as soon as possible, an idea which I might add Alex was promoting quite early on.
CAPTCHA Economics
CAPTCHA (Completely Automated Public Turing test to tell Computers and Humans Apart) are the distorted text puzzles that are designed to keep spammers out of websites. Although some AI systems have been developed to solve CAPTCHAs the market has discovered that it is cheaper to farm out the problems to workers in developing countries.
Here is an amazingly detailed investigation from researchers at UC San Deigo of the market for solving CAPTCHAs.
Bottom line:
- Prices run about $1 per thousand CAPTCHAs solved, depending on the time of
day and demand.
- The median response time to solve a CAPTCHA is 14
seconds and accuracy runs about 90%.
- “[T]he
business of solving CAPTCHAs,…is a well developed, highly-competitive industry with the capacity to solve on the order of a million CAPTCHAs per
day.”
Hat tip: Mim’s Bits.
A short seasonal cycle: both a negative supply shock and a negative demand shock
This Friday some people will be so paralyzed with fear they simply won't get out of bed. Others will steadfastly refuse to fly on an airplane, buy a house, or act on a hot stock tip. It's Friday the 13th, and they're freaked out.
"It's been estimated that [U.S] $800 or $900 million is lost in business on this day because people will not fly or do business they would normally do," said Donald Dossey, founder of the Stress Management Center and Phobia Institute in Asheville, North Carolina.
The full story is here, hat tip goes to BrainPicker, and I am not sure how formal that quantitative estimate is. Note also that some of that business is likely made up on other days, either earlier or later.
Wichita fact of the day
It is, in percentage terms, the most export-oriented city in the United States.
According to a study published late last month by the Brookings Institution, a Washington think-tank, nearly 28 per cent of the city’s gross metropolitan product is sold abroad. That makes it the most export-oriented in the country, just ahead of Portland, Oregon – noted for its computer and electronics companies – and San Jose in California’s Silicon Valley.
Can you say "small aircraft"?
The Paul Ryan debates
I haven't followed the numerical specifics of his plan (see Krugman, McArdle, and Ezra), which will never be voted on, so at this point I'm more interested in the general problem motivating the reform. We all know that health care spending has to be restrained in some manner. There are (at least) two approaches:
1. Have the federal government take a more active role in shutting down or limiting some reimbursements, based on efficacy studies ("death panels").
2. Turn some or all of Medicare into a fixed voucher program and let individuals choose which set of restrictions they will accept from private suppliers ("grandma bangs on HMO door").
As I understand Ryan's approach, he is putting a great deal of emphasis on #2, whereas most Democrats favor #1.
Which mix of #1 and #2 is best is one question; which mix people will accept politically is another. A third issue is which mix is time consistent and a fourth is which prevents "rationed" people from simply popping up somewhere else in the public health system. I would start with those distinctions and see which policy direction people need to be nudged in, relative to the path we are on now. That probably means greater acceptance of both #1 and #2, to some extent.
I believe that #2 works fine for a lot of health care, especially the less controversial and less emotional areas of care, such as laser eye surgery. Neither #1 nor #2 work especially well, or are especially popular, for end of life issues.
Whatever problems the Ryan plan may have (should we dismiss all ideas from people with overly optimistic forecasts?), I take his contribution to be a nudge in the direction of #2, given the current political equilibrium. Overall I see this as a healthy nudge, even if you think that relying fully or even mainly on #2 is undesirable, infeasible, and time inconsistent.
Very difficult questions
I have spoken at Jane St. Capital a few times and it is perhaps my favorite audience; everyone wants analytic content and everyone came prepared. All of the questions were tough, but two in particular I was not prepared for.
First, I was asked "Which is the most underrated statistic for judging the value of an NBA player?"
My attempted answer was the player's presence on a very good, consistently winning team. There are many players with impressive statistics, including unselfish statistics such as assists and rebounds, who are only of value on bad teams. We overvalue such players. Overall, really good teams don't keep bad players and really bad teams don't keep good players. If a player has never been on a really good team, he might not be so good, with apologies to the earlier Kevin Garnett.
Second, I was asked who is most likely to write a novel about the financial crisis which will stand the test of time. I do not see any such author around today, but if you have ideas leave them in the comments. "DeLillo, if he were thirty years younger" was the best I came up with. Or maybe something from genre fiction. There are notable works of fiction dealing with the Great Depression, but I can't recall that any of them focus on the financial side. It's a hard topic to be dramatic about, without being either too simplistic or overly technical.
Official U.S. trailer for *Freakonomics* documentary
You'll find it here. It's a well-done preview, the movie is rated PG-13, and it's from the moviemakers behind the superb King of Kong.
I thank some PR guy for the pointer.
The Mulligan and Mankiw challenge to extreme Keynesians
To quote Greg:
University of Chicago economist Casey Mulligan offers a challenge to that view. Casey points out that there is a regular surge in teenage employment during the summer months because more teenagers are available to work (that is, the supply of their labor has increased). That is no surprise: It is normal supply and demand in action. But if aggregate demand were the main constraint on employment, this increase in supply should not translate into higher employment during deep recessions such as this one. But it does!
The link is here.
*City on the Edge*
The author is Mark Goldman and the subtitle is Buffalo, New York. I loved this book. It is a splendid portrait of twentieth century America, the connection of industrialism and the arts, the decline of manufacturing and the resulting urban casualties, an applied study of the wisdom of Jane Jacobs, and on top of all that it is the best book I've read on how excess parking helped destroy an American downtown. I recommend this book to all readers of serious non-fiction.
Tradeoffs
From David Foster Wallace's 1995 essay, The String Theory:
… it's better for us not to know the kinds of sacrifices the professional-grade athlete has made to get so very good at one particular thing. Oh, we'll invoke lush cliches about the lonely heroism of Olympic athletes, the pain and analgesia of football, the early rising and hours of practice and restricted diets, the preflight celibacy, et cetera. But the actual facts of the sacrifices repel us when we see them: basketball geniuses who cannot read, sprinters who dope themselves, defensive tackles who shoot up with bovine hormones until they collapse or explode. We prefer not to consider closely the shockingly vapid and primitive comments uttered by athletes in postcontest interviews or to consider what impoverishments in one's mental life would allow people actually to think the way great athletes seem to think. Note the way "up close and personal" profiles of professional athletes strain so hard to find evidence of a rounded human life — outside interests and activities, values beyond the sport. We ignore what's obvious, that most of this straining is farce. It's farce because the realities of top-level athletics today require an early and total commitment to one area of excellence. An ascetic focus. A subsumption of almost all other features of human life to one chosen talent and pursuit. A consent to live in a world that, like a child's world, is very small.
Hat tip to Tim Carmody filling in at Kottke.
Markets in everything
David Rees, the man behind the popular political comic Get Your War On, wants to sharpen you a pencil. Slowly. Attentively. And with a carefully selected sharpener or blade that suits the pencil best. If there are movements for slow food and slow reading, why not for slow writing implements?
"With an electric pencil sharpener, a pencil is meat," Rees said. "It's this thoughtless, Brutalist aesthetic. For me, it's almost a point of pride that I would be slower than an electric pencil sharpener."
This is how Rees' artisanal pencil sharpening works: You might send him your favorite pencil, but Rees more often selects and sharpens a classic No. 2 pencil for his clients, he promises, "carefully and lovingly." He slides the finished pencil's very sharp tip into a specially-sized segment of plastic tubing, then puts the whole pencil in a larger, firmer tube that looks like it belongs in a science experiment. Throw it at a wall, he says, and it won't break. The cost? $15.
For the pointer I thank Ellen P.
Why is there a boom in temporary hiring?
Trevor Frankel offers his thoughts:
The part that most clearly indicates policy is the problem is the temp hiring. If businesses are hiring temps off the bottom of a recession, it means that they're seeing demand pick up but they're too uncertain to actually hire someone full time. This is usually followed by permanent hiring, but in this recovery, it has not been. The only obvious culprits here are a) higher required wages and healthcare costs (minimum wage, housing interventions and Obamacare are prime candidates here) and b) general lack of confidence in the economy and policy (the political climate in general is the prime candidate here).
Here is some background:
Temp hiring has been off the charts – temp jobs are up 20% year over year, while permanent private sector jobs are down 1%. (source: http://www.ritholtz.com/blog/2010/08/follow-up-on-temp-services-hiring/)
This is not an argument which I have been pushing, but the boom in temporary hiring does lend some support to it.
Correction of Brad DeLong
He is wrong to suggest that I am calling for deflation. He draws his conclusion by citing advice which is a thought experiment and which I call "patently absurd" elsewhere in the post. I also left this comment on his blog:
I am not calling for deflation, this is simply a misinterpretation of what I wrote. Further an unemployed person with debt is even worse off than an employed person at a lower wage. *And* even our fairly wimpy Fed is not going to allow a high rate of deflation and thus a big real increase in the debt burden.
Here is an earlier column of mine, entitled "How a Little Inflation Could Help a Lot." While I am increasingly unsure how much good such inflation would do, I have been arguing for a year that it is worth trying and for instance just yesterday I wrote in the Brad-cited post "I favor a more expansionary monetary policy".
Spontaneous order on the road
Here’s a video of a small town in Britain that turned its traffic lights off. Order ensued.
The experiment is not unique. Tom Vanderbilt wrote an excellent piece in The Wilson Quarterly a few years ago on traffic revolutionary Hans Monderman (see also this NYTimes piece) who has redesigned a number of city centers:
At the town center, in a crowded four-way intersection called the Laweiplein, Monderman removed not only the traffic lights but virtually every other traffic control. Instead of a space cluttered with poles, lights, “traffic islands,” and restrictive arrows, Monderman installed a radical kind of roundabout (a “squareabout,” in his words, because it really seemed more a town square than a traditional roundabout), marked only by a raised circle of grass in the middle, several fountains, and some very discreet indicators of the direction of traffic, which were required by law.
As I watched the intricate social ballet that occurred as cars and bikes slowed to enter the circle (pedestrians were meant to cross at crosswalks placed a bit before the intersection), Monderman performed a favorite trick. He walked, backward and with eyes closed, into the Laweiplein. The traffic made its way around him. No one honked, he wasn’t struck. Instead of a binary, mechanistic process–stop, go–the movement of traffic and pedestrians in the circle felt human and organic.
A year after the change, the results of this “extreme makeover” were striking: Not only had congestion decreased in the intersection–buses spent less time waiting to get through, for example–but there were half as many accidents, even though total car traffic was up by a third.
The experiments are interesting in their own right but they are also very good illustrations of spontaneous order; how order is possible without orders.
Hat tip: Dan Klein.