Category: Uncategorized

My favorite things Poland

by  Tyler Cowen in

No, I am not there now, but Adam D. emails me and requests this, so here goes:

1. Novel: Stanislaw Lem, Solaris, all about identity and erotic guilt.  Next in line would be any number of Isaac Singer novels, I don’t have a favorite offhand.  Soon I will try The Family Moskat.  Gombrowicz is probably wonderful, but I don’t find that it works for me in translation.  Quo Vadis left me cold.

2. Chopin works: The Preludes, there are many fine versions, and then the Ballades.  The Etudes excite me the most, the Mazurkas and piano sonatas #2 and #3 are most likely to surprise me at current margins of listening.  I find it remarkable how I never tire of Chopin, in spite of his relatively slight output.

3. Painter: This one isn’t as easy as it ought to be.

4. Architect: Daniel Libeskind was born in Poland.  But more generally one can cite Krakow, and I suspect the older versions of Gdansk.

The wooden churches and folk art of southern Poland also deserve mention.

5. Political thinker: Czesław Miłosz, The Captive Mind, about the capitulations of artists to communism, though subtler than just an anti-state polemic.  He once stated: ” I have never been a political writer and I worked hard to destroy this image of myself.”  I do not feel I can judge his poetry, though last year’s biography of him was a good book.

6. Astronomer and originator of the quantity theory of money: Copernicus.

7. Television show: The Decalogue, perhaps #4 is my favorite.  Here is good NPR coverage.

8. Movie: Any of the Andrzej Wajda classics would do, maybe start with Kanal or Ashes and Diamonds.  More recently I would opt for Ida.  I like Kieślowski’s TV more than his films, and prefer Hollywood Polanski to Polish Polanski.

9. Classical pianist: There are many, but I will cite Kristian Zimerman over Artur Rubinstein.  The former plays the piano better.  Josef Hofmann deserves mention, but there are dozens of picks here.

10. Jazz musician: Trumpeter Tomasz Stańko.

11. Economists: There is Kalecki, Hurwicz, the now-underrated Oskar Lange (doesn’t Singaporean health care work fine?), and Victor Zarnowitz. I had thought Mises was born in Poland, but upon checking it turned out to be Ukraine.

Overall the big puzzle is why there isn’t more prominence in painting, given Poland’s centrality in European history.

That was then, this is now, rent control vs. building deregulation edition

by  Tyler Cowen in

By early 1919 many New Yorkers — even many who held that the long-term solution to the housing problem was “to build more homes and build them now” — had come to believe that neither private enterprise nor public authority could do much to alleviate the housing shortage in the near future.  From this belief it was only a short step to the conclusion that the state legislature had to take action to stop the city’s rapacious landlords from raising the rent…

Here you will find a recent WSJ article (or read this ungated) about municipalities once again turning to rent control…

The above passage is from the highly useful and deeply comprehensive The Great Rent Wars: New York, 1917-1929, by Robert M. Fogelson.  Note that back then both rent control and “building more” won.  As for today, Megan has a relevant column.

Why is idiosyncratic stock market volatility so low?

by  Tyler Cowen in

We find that the historically low IR [idiosyncratic risk] can be explained by the changes in firm characteristics that take place since the 1990s.

…the number of listed firms has fallen dramatically and the composition of listed firms has changed considerably, with public firms becoming larger and older.  We show that there is a stable relation between firm-level idiosyncratic risk and firm characteristics…we find no evidence that IR increases with institutional ownership…

That is from Bartram, Brown, and Stulz, in the NBER working paper series.

Is legal marijuana more potent?

by  Tyler Cowen in

Yes, here is Keith Humphreys from Wonkblog:

Although some people believe prohibiting drugs is what makes their potency increase, the potency of marijuana under legalization has disproved that idea. Potency rises in both legal and illegal markets for the simple reason that it conveys advantages to sellers. More potent drugs have more potential to addict customers, thereby turning them into reliable profit centers.

In other legal drug markets, regulators constrain potency. Legal alcohol beverage concentrations are regulated in a variety of ways, including through different levels of tax for products of different strengths as well as constraints on labeling and place of sale. In most states, for a beverage to be marketed and sold as “beer,” its alcohol content must fall within a specified range. Similarly, if wine is distilled to the point that its alcohol content rises too high, some states require it be sold as spirits (i.e., as “brandy”) and limit its sale locations.

As states have legalized marijuana, they have put no comparable potency restrictions in place, for example capping THC content or levying higher taxes on more potent marijuana strains. Sellers are doing the economic rational thing in response: ramping up potency.

How about the Netherlands?:

The study was conducted in the Netherlands, where marijuana is legally available through “coffee shops.” The researchers examined the level of delta-9-tetrahydrocannabinol (THC), the main intoxicant in marijuana, over a 16-year period. Marijuana potency more than doubled from 8.6 percent in 2000 to 20.3 percent in 2004, which was followed by a surge in the number of people seeking treatment for marijuana-related problems. When potency declined to 15.3 percent THC, marijuana treatment admissions fell thereafter. The researchers estimated that for every 3 percent increase in THC, roughly one more person per 100,000 in the population would seek marijuana use disorder treatment for the first time.

The Dutch findings are relevant to the United States because high THC marijuana products have proliferated in the wake of legalization. The average potency of legal marijuana products sold in the state of Washington, for example, is 20 percent THC, with some products being significantly higher.

I believe that marijuana legalization has moved rather rapidly into being an overrated idea.  To be clear, it is still an idea I favor.  It seems to me wrong and immoral to put people in jail for ingesting substances into their body, or for aiding others in doing so, at least provided fraud is absent in the transaction.  That said, IQ is so often what is truly scarce in society.  And voluntary consumption decisions that lower IQ are not something we should be regarding with equanimity.  Ideally I would like to see government discourage marijuana consumption by using the non-coercive tools at its disposal, for instance by making it harder for marijuana to have a prominent presence in the public sphere, or by discouraging more potent forms of the drug.  How about higher taxes and less public availability for more potent forms of pot, just as in many states beer and stronger forms of alcohol are not always treated equally under the law?

Wednesday assorted links

by  Tyler Cowen

1. Swedish summer seminar in classical liberalism.  And Bryan Caplan says something nice about me (I am not suggesting this is rare, though).

2. Personal bests act as reference points.

3. “In the inner London borough of Wandsworth, a home measuring just 91 inches across is on the market for about $1.4 million (£1 million).”  Link here.

4. Who will be the next PM of Singapore?

5. Jerry Z. Muller on the tyranny of metrics.

6. Vincent Geloso’s nominations for the best economic history papers of 2017.

Bitcoin and covariance

by  Tyler Cowen

Bitcoin and stocks bottomed at almost exactly the same moment.  This is bad for Bitcoin.  Part of Bitcoin’s appeal is that it is weird, and perhaps does not covary with  standard financial assets in traditional ways.  But at least yesterday it did, and that should be a force pushing Bitcoin lower.

Addendum from DB in the comments:

Matt Levine from yesterday: “Bloomberg tells me that Bitcoin’s daily correlation with the S&P 500 Index was 0.047 in 2017, -0.049 in 2016, 0.07 in 2015 and -0.081 in 2014. That is about as uncorrelated an asset as you could ask for — and a lot of Bitcoin buyers were asking for uncorrelated assets. So far in 2018 the correlation is 0.286. Still pretty uncorrelated! But … less so. When Bitcoin was a weird alternate-currency dream of anarchists, there was no reason for it to be correlated with stocks. When it is just an asset class that regular people trade, buying when they feel confident and selling when they feel nervous, that correlation ticks up.”

Why have some asset prices been so high?

by  Tyler Cowen in

Do they have to be bubbles? And is it so terrible if they fall?  I cover those topics in my latest Bloomberg column, here is one bit:

In a volatile and uncertain time politically, we have observed sky-high prices for blue-chip U.S. equities. Other asset prices also seem to be remarkably high: home values and rentals in many of the world’s top-tier cities, negative real rates and sometimes negative nominal rates on the safest government securities, and the formerly skyrocketing and still quite high price of Bitcoin and other crypto-assets.

Might all of those somewhat unusual asset prices be part of a common pattern? Consider that over the past few decades there has been a remarkable increase of wealth in the world, most of all in the emerging economies. Say you hold enough wealth to invest: What are your options? Well, the stock markets of China and Russia are unsafe and not well developed, and many other emerging economies, such as Turkey and Brazil, have been wracked with uncertainty and political turmoil. So you might take a disproportionate share of your money and put it into high-quality, highly liquid assets. That might include the stocks of the Dow Jones Industrial Average and real estate in London, to name two possibilities.

In relative terms, the high-quality, highly liquid blue-chip assets will become expensive. So we end up with especially high price-to-earnings ratios and consistently negative real yields on safe government securities. Those price patterns don’t have to be bubbles. If this state of affairs persists, with a shortage of safe investment opportunities, those prices can stay high for a long time. They may go up further yet.

These high asset prices do reflect a reality of wealth creation. They are broadly bullish at the global scale, but they don’t have to demonstrate much if any good news about those assets per se. Rather there is an imbalance between world wealth and safe ways of transferring that wealth into the future…

To sum this all up in a single nerdy finance sentence, in a world where wealth creation has outraced the evolution of good institutions, the risk premium may be more important than you think.

In this “model,” price declines do not have to be disastrous, but rather can reflect a kind of normalization.  Do read the whole thing.  The theory also predicts that bond, equity, and Bitcoin prices should all decline at the same time, which is indeed what happened yesterday.

The return of Nigeria’s kidnapped girls

by  Tyler Cowen in

Joe Parkinson and Drew Hinshaw at the WSJ follow up on what was a super dramatic story that turned into a neglected and under-reported tale.  What is life like for the Boko Harum kidnap victims after their liberation?

The women had acclimated to the forest camps where Boko Haram insurgents threatened them at gunpoint to either convert to Islam and marry a fighter or be a slave.

About half chose slavery, which cost them access to food and shelter.

Here is another bit:

Psychologists who specialize in kidnap victims say they are unsure about the best way to simultaneously treat and educate such a large group of women—ages 18 to 27—after years of collective captivity and abuse.

The spelling bee contests, one healing piece of the curriculum, arrived as something of a surprise. It was the Chibok girls who came up with the idea.

And:

One night, plopped on couches, they watched “Akeelah and the Bee,” a movie about an 11-year-old African-American girl in Los Angeles who finds her confidence after her father’s death by winning the Scripps National Spelling Bee.

The students watched the movie again and again over bowls of popcorn. They went to their teachers with a demand: They wanted to hold their own spelling bees. The teachers agreed.

The young women began memorizing vocabulary lists and testing each others’ lexicographic skills. Their wordplay escalated into late-night spelling battles. “It was unbelievably competitive,” Mr. Braggs said.

Spelling employs a skill many of the women honed while captive: mnemonic memory. Some spent much of their time memorizing lengthy prayers and hymns. Others composed diary entries in their heads—their thoughts, injustices they suffered—they would later log in journals they kept hidden. In secret, they retold the story of Job, the biblical figure who was punished in a test of his faith.

By the way, 112 girls remain missing and 13 are presumed dead.

Chicago’s land tax and how the city survives being such a fiscal mess

by  Tyler Cowen in

https://twitter.com/Austan_Goolsbee/status/958696452125024256

But wait, isn’t Chicago a fiscal mess? How about the state of Illinois?  It remains the case that living in Chicago is still remarkably affordable, and many of the neighborhoods have wonderful food, buildings, and offer a relatively safe (not always) and walkable environment.  You may even hope to find a parking spot.

I would put it this way: there are many ways to impose a Georgist land tax, fiscal insolvency being one of them.  Very wealthy people and institutions know that if they relocate to Chicago, they will be required to ante up for the final bill.  And so they stay away.  For a city of its size and import, Chicago just doesn’t have that many billionaires, nor do I think a rational billionaire should consider moving there.

In other words, there is a pending wealth tax.  Either directly or indirectly, this will place fiscal burdens on Chicago land, the immobile factor.  And this keeps down rents in Chicago now.

Overall, I do not recommend this fiscal course of action, and Chicago may well become a worse city due to eventual insolvency at the local and state levels.  Still, if you are wondering how it is that Chicago is so affordable — and wonderful — right now, this is part of the answer.

I also should note that not every neighborhood in Chicago benefits from this equilibrium, as in some parts gentrification is difficult to come by.