Category: Uncategorized
Ian Bremmer on Ukraine, and an observation on Putin’s food import ban
Putin’s Plan A: Long game, squeeze Ukraine, force deep federation, formalize Russian influence & primacy in SE
Plan B: Invade
The link to that tweet is here. There is more from Ian here.
I find it worrying that Putin is suspending food imports from parts of the West. (Note that the text of the ban may be deliberately ambiguous.) Commentators are criticizing the economics of such a move, but I think of this more in terms of Bayesian inference. Long-term elasticities are greater than short. Under the more pessimistic reading of the action, Putin is signaling to the Russian economy that it needs to get used to some fairly serious conditions of siege, and food is of course the most important of all commodities. Why initiate such a move now if you are expecting decades of peace and harmony? Or is Putin instead trying to signal to the outside world that he is signaling “siege” to his own economy? Then it may all just be part of a larger bluff. In any case, Eastern Europeans do not take food supply for granted.
Blackmail markets in everything
Will the recent decline in entrepreneurship be reversed by demographic forces?
Annie Lowrey documents that decline, Matt Yglesias offers a partially optimistic hypothesis:
…people are founding fewer new businesses. But why?
One possibility is that the link to population aging is quite literal. A study by Vivek Wadhwa, Raj Aggarwal, Krisztina Holly, and Alex Salkever that looked specifically at “high-growth” industries found that the typical successful founder is 40. Not someone who’s at the tail-end of his career, but not someone who’s fresh out of school either. That’s in part because “professional networks were important to the success of their current business for 73 percent of the entrepreneur,” and it takes time to achieve that success. Mark Zuckerberg founded a great company when he was in college, but that kind of super-young founder is the exception not the rule — most people need some practical experience and contacts to succeed.
And back in the early 1990s, there were a lot of people in their late-thirties and early forties…
Nowadays that cohort of people’s prime founding years are behind them. There is another large cohort of people coming up, but right now they’re too young to be peak entrepreneurs. This cool CNN graphic shows that the most common age in the United States right now is 22 and 23, and that’s followed by 53 and 52.
The story about aging is so well-known that people tend to neglect this sub-trend of the youth bulge. But right now we’re at a moment where a lot of inexperienced workers are entering the labor market, and 10 to 20 years from now we’ll be in a moment when a lot of experienced workers are founding new businesses. But for the past 10 years, we’ve been seeing a demographic trend that’s unfavorable to entrepreneurship.
There are a few relevant questions:
1. At any point in time, are there external benefits or external costs to having more new businesses founded?
2. As organizational capabilities increase with progress, does market equilibrium serve up larger and older firms? It seems so.
3. What are the external social costs and benefits of that progression?
In poor, developing economies, I think of high levels of petty entrepreneurship as a negative, rather than a positive. Might the United States be a bit the same way? Yet the continuation of The Great Stagnation makes that a hard line to buy into enthusiastically.
I thank Robin Hanson for a useful conversation related to this blog post.
Assorted links
How do moles smell underwater?
Blowing Bubbles
I was pleased to see the mention of the star-nosed mole in Nick Richardson’s review of Ned Beauman’s latest novel (LRB, 17 July). Richardson informs us that this marvellous creature ‘can smell underwater’. True, but not thanks to the ‘nose’ that gives it its name. The 22 fleshy appendages that protrude from the mole’s face are not an olfactory organ at all, but a skin surface containing more than 100,000 sensory neurons – it’s the most acute touch organ of any mammal on the planet and about six times more sensitive than the human hand. In order to ‘smell’ underwater – a phenomenon long thought impossible in mammals – the mole exhales air bubbles over objects then reinhales them, allowing odorant molecules in the bubbles to pass over the olfactory receptors.
Sarah Murray
Esher
The link is here, pointer from Hugo Lindgren.
The age of the meta-bribe (the punishment that is Germany)
Bernie Ecclestone, is to make a $100m (£60m) payment to end his trial on bribery charges, a district court in Munich has confirmed.
Ecclestone, 83, went on trial in Munich in April over allegations that he bribed a former German banker as part of the sale of a major stake in the motorsport business eight years ago.
German law provides for some criminal cases to be settled with smaller punishments, such as fines, though the size of the payment in Ecclestone’s case has led some to question a system that effectively favours wealthy defendants.
The Munich court said in a statement that $99m would be paid to the German treasury and a further $1m to a German children’s hospice charity. The money will be paid within a week, after which time the trial will officially be abandoned.
The full story is here, not quite China punishment of the day.
For the pointer I thank Dan Jackson.
China punishment of the day (Biblical)
Drivers caught using high beams inappropriately will now be offered on-the-spot training about the dangers of such practices, according to a posting on the Shenzhen Traffic Police’s verified account with Weibo.
Specifically, headlight-happy drivers will be forced to stare straight ahead into the glaring headlights of a police van for a period of several minutes.
“You still dare to use your headlights carelessly?” the Traffic Police posting asks. “If so, then starting from now we’ll make you stare at our high beams for five minutes.”
There is also a 300 yuan ($49) fine. The policy is popular in some quarters:
Still, most people reacted positively to the Shenzhen Traffic Police’s approach.
“An eye for an eye, and a tooth for a tooth! This punishment should be popularized. When can it be used to deal with red-light running or hit-and-run?” wrote another.
More people in The Middle Kingdom need to read Gary Becker. The full story is here.
Assorted links
1. Maps of cultural centers, a new research tool, fun too.
3. “Scientists reconstruct speech through soundproof glass by watching a bag of potato chips.”
4. Marathon finishing times have reference-dependent outcomes. And bumble bee cognitive individuality.
5. Good review of the excellent David Eimer book on Chinese minorities. And the strike that is Hong Kong. And who will end up owning New Zealand farms?
6. Early Mediterranean containerization.
7. Chefs, critics, solve for the equilibrium with four-letter words.
8. Serenading the cattle with my trombone (music video).
Political booms, financial crises
There is a new paper by Helios Herrera, Guillermo Ordoñez, and Christoph Trebesch and it has a striking result:
We show that political booms, measured by the rise in governments’ popularity, predict financial crises above and beyond other better-known early warning indicators, such as credit booms. This predictive power, however, only holds in emerging economies. We show that governments in emerging economies are more concerned about their reputation and tend to ride the short-term popularity benefits of weak credit booms rather than implementing politically costly corrective policies that would help prevent potential crises. We provide evidence of the relevance of this reputation mechanism.
Matt Yglesias on Tyler Cowen
Which is to say that while Cowen’s point about the global picture is both interesting and correct, his political stance is backwards. It’s not fans of Capital in the 21st Century who are pushing nationalism as an alternative to plutocracy, but its detractors. And though the recent politics in the US Congress have been driven by the somewhat odd sequence of events around the arrival of unaccompanied minors from Central America, the underlying pattern runs much deeper than that.
I don’t have an “he says exactly that” quotation to pull from Matt’s piece, but I believe he is saying I (or someone?) should be a Progressive instead of a “conservative economist” as he calls me. The article is interesting throughout.
My framing of course is different. It is not about who are the best people, but rather which are the best set of positions. Just to summarize, I generally favor much more immigration but not open borders, I am a liberal on most but not all social issues, and I am market-oriented on economic issues. On most current foreign policy issues I am genuinely agnostic as to what exactly we should do but skeptical that we are doing the right thing at the moment. I don’t like voting for either party or for third parties.
The economics of cyclone disasters
It’s not quite the Solow model. Here is a new paper from Solomon M. Hsiang and Amir S. Jin, “The Causal Effect of Environmental Catastrophe on Long-Run Economic Growth: Evidence From 6,700 Cyclones,” the abstract is this:
Does the environment have a causal effect on economic development? Using meteorological data, we reconstruct every country’s exposure to the universe of tropical cyclones during 1950-2008. We exploit random within-country year-to-year variation in cyclone strikes to identify the causal effect of environmental disasters on long-run growth. We compare each country’s growth rate to itself in the years immediately before and after exposure, accounting for the distribution of cyclones in preceding years. The data reject hypotheses that disasters stimulate growth or that short-run losses disappear following migrations or transfers of wealth. Instead, we find robust evidence that national incomes decline, relative to their pre-disaster trend, and do not recover within twenty years. Both rich and poor countries exhibit this response, with losses magnified in countries with less historical cyclone experience. Income losses arise from a small but persistent suppression of annual growth rates spread across the fifteen years following disaster, generating large and significant cumulative effects: a 90th percentile event reduces per capita incomes by 7.4% two decades later, effectively undoing 3.7 years of average development. The gradual nature of these losses render them inconspicuous to a casual observer, however simulations indicate that they have dramatic influence over the long-run development of countries that are endowed with regular or continuous exposure to disaster. Linking these results to projections of future cyclone activity, we estimate that under conservative discounting assumptions the present discounted cost of “business as usual” climate change is roughly $9.7 trillion larger than previously thought.
That link has an NBER gate, I do not yet see an ungated version.
Assorted links
Is growing income inequality diminishing middlebrow culture?
A.O. Scott considers that question in The New York Times. I am not sure I can sum up his view in a sentence, so I don’t know if this is criticizing him or partially agreeing with him. In any case, I don’t see growing income inequality as the main driving force behind the decline of middlebrow American culture. An individual’s level of education often predicts cultural consumption better than does his or her income, and education has not in general declined in this country.
Furthermore many forms of culture have grown much cheaper. Once you are paying for cable, the marginal dollar cost of watching a show or a movie at home is zero. Songs and music are much cheaper than twenty years ago, and eBooks make many (not all) books cheaper. In other words, if stagnant income groups wanted middlebrow culture, they still could afford it.
Global markets are growing and those markets are often relatively middlebrow in their orientation, which should maintain the return to producing middlebrow culture. And the United States continues to grow in population, even though the middle is shrinking in percentage terms. The supply of creative activity is quite elastic, so it is hard to argue the wealthy have placed all relevant artists in their employ and thus choked or starved the middle.
It is much more expensive to organize a middlebrow art exhibit than fifteen years ago, and we see fewer good ones, but that is mainly because of 9/11 and insurance rates and related institutional issues, not income inequality.
My view is a lot of people never wanted middlebrow culture in the first place, at least not in every sphere of their cultural consumption. The internet gave them more choice, they took it, and much of middlebrow culture lost its support base. Consider one area where the internet still doesn’t play that much of a role and that is theatrical productions. You can watch plenty of theatre on YouTube, but it’s not such a close substitute to seeing the show live. And if you look at Broadway theatre, it seems more relentlessly and aggressively middlebrow than ever before. Ugh, that is why I stopped going. NFL football seems middlebrow to me and the audience base still is there, again because the internet has not come up with a close competitor. If the sport has a problem it is the violence and injury, not that we’ve evolved into a mix of polo ponies and roller derby.
Assorted links
1. NFL players height and weight over time.
2. Why are start-ups slowing down?
3. Some material goods can make you happy.
4. On the Saudi-Israel “alliance.”
5. Mankiw on a reader on Sowell on sincerity, a very good point.
6. Lawyers without law school.
7. Really bad food markets in everything, potato chip edition.
Ghana isn’t doing as well as many people think
Ghana will turn to the International Monetary Fund for help after the west African country’s currency plunged roughly 40 per cent this year against the dollar, making the cedi the worst performing currency in the world in 2014.
Nearly three years after the start of oil production, which was meant to further strengthen the country’s fiscal position, the public purse is looking empty. Ghana is battling a double-digit fiscal deficit after a 75 per cent increase in public salaries over two years. Inflation is rising rapidly as the cedi plunges.
Ghana ran a fiscal deficit equal to 10.1 per cent of gross domestic product in 2013. The government has promised to lower the deficit to 8.5 per cent this year, but observers believe it would struggled to reduce it below 10 per cent.
The full FT story is here, here are ungated sources, here is one account from Ghana.