Category: Uncategorized
Globalization goes national
That is my latest Bloomberg column, and it address the common charge that globalization is over or has peaked. Global trade has in fact slowed down a great deal. But we are seeing a new kind of globalization, only inside the borders of the larger emerging economies, which often are not yet mature nation-states with complete economic integration. Here is one excerpt:
India also is seeing its different states and regions being tied together through migration, trade, and investment. You can see this in the food: tandoori chicken and dosas have become national standards, available throughout the country, and less closely associated with their particular regions of origin. Hindi is becoming more of a national lingua franca, and the Internet makes it possible to broadcast the same messages to the entire country at relatively low cost. Many these “globalizing” developments have spread expertise and capital from the more developed southern and western parts of India to the poorer eastern and landlocked regions. Labor, in turn, has migrated from the poorer states to the wealthier cities.
Significant barriers remain; for example, Indian trucks must pass through numerous checkpoints to carry goods around the country. Logistics costs remain high, at about 13 percent of gross domestic product. Fortunately, the recent move to a national goods-and-services tax will lower some of the state-level taxes on internal trade. Keep in mind that India’s most populous states would be among the larger nations in the world. So if Uttar Pradesh (over 200 million people) and Bihar (over 100 million people) have closer economic relations, it is a major advance in trade relations and resembles globalization in its economic consequences.
Here is the close:
But a lot of today’s globalization-by-any-other-name is, counterintuitively, taking the form of nation-building. And just as we got both good and bad sides of globalization, so will this process of nation-building be a mixed bag. It may, for example, sometimes include too much nationalism. Nonetheless, these stronger and better integrated political units probably will grow in wealth and economic sophistication, and in due time that will give us more globalization yet.
Much of the piece deals with China, do read the whole thing.
Wednesday assorted links
1. Free copy of Roger Paulin’s 662 pp. biography of August Wilhelm Schlegel, which received a very strong review from the TLS.
2. Explaining the cross-regional features of the Great Recession in the United States.
4. I can’t say I am convinced by this defense of Chomsky’s universal grammar.
5. Some basic economics of Wells Fargo.
6. A West Coast Straussian defense of Trump (no, not my view but the contrarian in me wishes to pass along some of the smarter people writing on this topic).
7. The secret stimulus: another fiscal failure.
The macroeconomics of firing aversion
I am indebted to Bryan Caplan for developing and popularizing the idea of “firing aversion.” The core notion is that employers often do not wish to fire people for one of the same reasons they do not wish to cut nominal wages — it can demoralize their broader workforce. Furthermore, some bosses simply may feel squeamish about the idea of firing people they know and like.
In the old days, bosses might have enjoyed “busting heads” to keep all the workers in line, but in this softer millennial age, well firing aversion is the order of the day, if only to ease future recruitment and boost intangible capital and institutional continuity.
Now imagine a macroeconomy where firing aversion is present. At time period zero, a boss hires one hundred workers, who at the time are perceived as being of roughly equal quality and thus are offered the same wage. After a few years on the job, however, some are “keepers,” while others are being paid more than their marginal products.
Because of firing aversion, they are not fired. Because of sticky nominal wages, they also do not take a pay cut. If the economy is imperfectly competitive, and times are good, this nonetheless can be a stable equilibrium.
Now let’s say a negative shock comes along: demand, supply, maybe a bit of both, as is usually the case. At some margin these workers can no longer be carried and the firing aversion of the boss is overcome and they lose their jobs. Then, a few points:
1. They’re not getting those jobs back.
2. They’re not worth a comparable wage elsewhere in many cases.
3. Per hour productivity likely will rise, even adjusting for ex ante measures of changes in worker composition.
4. Companies won’t want to pay higher wages to lure these workers out of leisure, rather they are branded as less productive than average and properly so.
5. These workers will have to lower their wage expectations for the next job by an above-average amount. That is one reason why their reemployment may be slow. And they won’t re-enter the labor market at anything like their old wages.
6. As the economy returns to full employment, you won’t observe rising wages in the traditional sense because these workers are pulling in relatively low wages.
7. The more that Charles Murray is right in his Coming Apart, the stronger some of these effects will be. Yet none of it requires a “sudden attack of laziness.”
8. The more the employer can tell apart the quality of different workers, the slower the recovery will be and the less pro-cyclical wages will be. Arguably we have been seeing this difference at work since the G.H.W. Bush recession.
OK, now maybe you don’t buy firing aversion, fair enough. Just sub back in the traditional assumption that bosses study and scrutinize worker quality more in tough times, when revenue is tight, and you get essentially to the same place and the same conclusions as listed above. Firing aversion is simply one way of stylizing a pretty simple incentive effect, namely that the weaker workers have a better chance when cash is flush.
Addendum: How many blog posts have I read asserting “Since wages are not rising, etc., therefore various conclusions including lack of full employment, etc.”? Hundreds, I believe, mostly from the Keynesian bloggers. But in the data, real wages were never very cyclical in the first place. And in theory we should not expect much if any real wage cyclicality either. Most of all, the more employers can measure worker quality, the less cyclical real wages will be. And yes I know real wages just rose a lot (see the next blog post to come), if anything that is a sign recovery has been here for some time, not that finally recovery is arriving.
Monday assorted links
1. Which body part hurts the most when stung by a bee?
2. The cinematic culture that is North Korea.
3. Should you just stop worrying about your clutter?
4. Does cash in the bank predict happiness better than does wealth? Oddly, I find this somewhat intuitive.
5. Might we be able to watch Carlsen vs. Karjakin live in virtual reality?
6. Google Maps now seems to feature the nine-dash line. Here is background on the nine-dash line.
Sunday musings
I hadn’t known Ed “Let’s take the con out of econometrics” Leamer was the VP on the Larry Kotlikoff ticket.
The quality, and popularity, of Sully raises anew the question of why Hollywood doesn’t make more such movies. Which is the scarce input? The script? Yet virtually every Clint Eastwood movie seems to come up with a good script. I suspect “a recognized auteur with bargaining clout” is what is scarce.
Insects are not so scarce, but the marketing is tough:
Aketta grows its crickets in the United States and fills orders on a first come, first serve basis with weekly harvests. The company sells cricket flour and whole-roasted crickets. Flour is made from 100% milled crickets and has a “deep, earthy, umami flavor with hints of raw cocoa.” Sold in small batches of 1 to 1.5 lbs. Order online.
Here are many more insect food sources, but the claim is that the most innovative insect-selling start-ups are in Europe.
This story has scary good photos:
The Bund reached the height of its prominence on February 20, 1939, when some 20,000 members held a “Pro-America Rally” in Madison Square Garden.
Inside, jackbooted Nazi supporters filled the aisles while speakers ranted against President “Frank D. Rosenfeld” and his “Jew Deal.”
Outside, some 80,000 anti-Nazi demonstrators furiously protested the event, clashing with police and attempting to gain entry to the arena and shut it down.
The Bund called George Washington “the first fascist.”
Chileans remain upset at their semi-privatized pension system (NYT), and I say that is now the country to sell short.
Sunday assorted links
1. The case for wooden skyscrapers. And what is trending in Korean beauty?
2. Is the poverty rate rising for elderly Germans?
3. Noah Smith responds to me on parental leave; he doesn’t say if he also favors policies discouraging female labor supply to help keep families together.
4. How Britain might reform its National Health Service.
6. The Uber deal with Quebec: among other features, surge pricing is capped at 1.5x.
Saturday assorted links
1. Review of the new Richard Posner biography.
3. The blind astronomer of Nova Scotia.
And this:
A couple of months ago, Patrick Collison came to me with another crazy idea. He said Stripe wanted to make “simple incorporation as a service”, so that any entrepreneur worldwide could have a corporate entity and a bank account spun up about as easily as they could get an EC2 server.
This idea is crazy. I’ve incorporated four companies and opened business bank accounts for all of them. The most recent required over a hundred pages of documentation and six weeks of negotiation to assuage a risk department’s concerns about foreign tech entrepreneurs. (Thanks, Bitcoin.) You’re not supposed to be able to do this.
Stripe did it. With crazy speed: the project was in beta within 11 weeks of conception. It can take that long to form a single company in much of the world. Stripe solved the problem like an engineer: establishing one company requires an annoying amount of form-filling so instead of buckling down and doing it you just make a company-establishing web application and abstract away form-filling for all time.
And they’re crazily ambitious about where it ends up: not simply incorporating companies, but eating all of the crufty back office work which distracts Internet businesses from getting more real products into the hands of real customers. Payments, contracts, invoices, bookkeeping, incorporation, taxes, etc etc, all things you have to do even if what you’re actually doing is selling bingo cards to elementary schoolteachers.
Crazy! But stay tuned…
My Conversation with Ezra Klein
I will be interviewing him shortly, for the Conversations with Tyler series, podcast only no public venue.
What should I ask him?
Friday assorted links
1. Compared to other consumption expenditures, the U.S. is not a significant health care outlier.
2. Enjoy famous artworks without gluten.
3. “The man said he was hired by the airport to keep track of the precise location of every car in the lot, explaining that the data is most often used by the airport when passengers returning from a trip forget where they parked their vehicles.” Link here.
4. You get what you measure: millions of fake accounts at Wells Fargo.
5. Not all Chinese companies are paying off on the Taylor Swift boyfriend break-up.
6. One way to rank World Bank presidents, not the way I would choose.
7. John R. Coleman, RIP: “In his abbreviated career as a blue-collar worker, he concluded that academia was not quite as artificial as he had thought and manual labor not nearly as satisfying.”
A new (old) argument against a guaranteed basic income
Later this year, roughly 6,000 people in Kenya will receive regular monthly payments of about a dollar a day, no strings attached, as part of a policy experiment commonly known as basic income.
…In a recent GiveDirectly blog post, the charity’s Kenya-based official, Will Le, explains that refusal rates in East Africa have typically held steady between 4% and 6% in past cash transfer trials. They’ve been especially low in countries like Uganda and Rwanda. In one Kenyan region known as Homa Bay, however, the rates have risen as high as 40%.
…GiveDirectly’s investigations have shown that people who refuse the cash are skeptical. They find it “hard to believe that a new organization like GiveDirectly would give roughly a year’s salary in cash, unconditionally,” Le writes. “As a result, many people have created their own narratives to explain the cash, including rumors that the money is associated with cults or devil worship.”
Here is the full story, the pointer is from the excellent Samir Varma. And here is the GiveDirectly response.
Samir also refers us to this study of why not all states have legalized medical marijuana, here is one result: “If all 50 states had legalized medical marijuana by 2014, according to their estimates, that could translate to savings of $1.5 billion per year in Medicaid spending.”
Thursday assorted links
1. Who needs the standing desk when you’ve got the 5?
2. Puffin kung fu.
3. How to launch nuclear weapons.
4. How to pick the fastest line (NYT).
5. Education boosts economic growth, but only with a long lag (pdf).
6. “…RAND’s calculations plus my own Fermi estimate suggest that prescription drug price regulation would cost one billion life-years, which would very slightly edge out Communist China for the title of Worst Thing Ever.” Link here.
Wednesday assorted links
1. Chess with tractors and harvesters. And chess as data for psychological research.
2. A contrarian view on Chinese infrastructure investment as leading to excess fragility.
3. Joshua Mitchell tries to produce a smarter version of Trump’s ideas. And Peter Thiel on why to support Donald Trump. Not my views, but always happy to present smart people who think otherwise and engage with the core issues.
5. Biblioburros, and other unusual libraries.
6. How many Obamacare enrollees are getting subsidies?
7. How to restructure government transparency, and here is Matt’s underlying piece Against Transparency.
Tuesday assorted links
Good sentences about miniature donkey therapy meet-ups
A miniature donkey can change your life. Ten of them can change it a lot.
And:
Five years ago, Mr. Stiert was a software engineer at IBM. A bunch of things happened — divorce, a layoff, a sort of reckoning. Now, at 57, he says, “Every day is donkey day.”
And:
Ms. Hill, 26, said she kept returning because donkeys “don’t judge.”
“They understand, even though they don’t talk,” she said.
And the dreaded regulatory state raises its feared hand:
(Before you run out to shop for donkeys yourself, make sure they’re legal in your town. They are not in New York City, for instance, where the Health Code bans “all odd-toed ungulates” — hoofed animals — other than domesticated horses, “including, but not limited to, zebra, rhinoceros and tapir.”)
Those are not the only good sentences about miniature donkey therapy meet-ups, Andy Newman at the NYT has more. Here is a final winner:
For all their surprising virtues, donkeys can be a little stubborn.
Monday assorted links
1. More Zorn.
2. Many corporations can vote in Hong Kong’s next election.
3. Slave prices and malaria-immune slaves.
4. “Among their stranger attributes, armadillos can float down a river rolled in a ball, walk small distances underwater and can carry leprosy—though less than 1% of the population in the U.S. carries the disease, biologists say.” — armadillo nationalism is on the rise. Now I know who is going to pay for that wall…
5. “Second Labor MP aligns with Beijing over South China Sea” — the polity that is Australia.
6. More experienced Uber drivers adhere more closely to the substitution effect (NYT).