Category: Uncategorized

Secrecy markets in everything how to know you are living next door to OBL edition

by  Tyler Cowen

The neighbor said if local children kicked a ball into the compound, someone from inside would pay the children for the ball rather than let them step onto the grounds.

From CNN, via MonkeyCage.

From the comments: “Not surprisingly, the kids understood incentives. The lead audio report now on the NYT says that the kids would be given 50 rupees (about $1.12 USD according to x-rates.com) and that they would therefore repeatedly kick the ball over the fence.”

*Pakistan: A Hard Country*

by  Tyler Cowen in

That is the new and excellent book by Anatol Lieven, and there is now more reason than ever to read it.  Here are a few things I learned from the book:

1. For most of the years since 1947, Pakistan has had higher economic growth rates than did India.  Pakistan does not have the same pockets of extreme poverty, or for that matter the extreme wealth.  The level of economic equality in Pakistan is relatively high.

2. Charitable donations run almost five percent of gdp, one of the highest percentages in the world and this reflects the emphasis on alms-giving in Islam.

3. A good quotation from a businessmen: “One of the main problems for Pakistan is that our democrats have tried to be dictators and our dictators have tried to be democrats.”

4. Agriculture pays virtually no tax and the government lends lots of money to businesses and doesn’t seriously ask for it back.  As a result Pakistan collects far less revenue than does India, even comparing areas of comparable per capita income.  If Pakistan were a state of India, it still would be considerably richer per capita than India’s poorest regions, such as Bihar.

5. The Pakistani state is nonetheless a lot more stable than most people think.  In part this is because of the conservative structure of kinship and landholder power in the country.

6. The main threats to the future of Pakistan have to do with ecology and water, not politics.

7. The end of the book has a very interesting discussion about how U.S. actions in Pakistan affect different coalitions, feelings of humiliation, relative status relationships, etc.

Definitely recommended, as are Lieven’s books on the Baltics and Ukraine.

Osama bin Laden is dead

by  Tyler Cowen

My quick take is that that Obama will be re-elected (getting Osama is way more important than Iraq or Saddam in the American mind, attacks on American soil, etc.), at this point the Republicans won’t try to beat him from the center and will thus nominate a more extreme candidate and lose badly, and the most important effects will be on Pakistan, not this country.

What do you think?

p.s. Check out this photo.

Childhood memories

by  Tyler Cowen in

Alex’s post brought back some childhood memories. At school, in sixth and seventh grade, we played a game called “Bombardment,” where you wailed the ball at the other kid’s head, as hard as you could.  If a kid shied away from the ball, the gym teacher laughed at him.

After school, there was a game called, appropriately, “Kill the guy”; now it’s an on-line game.

I played Little League for seven years.  One day during practice I was in the outfield and I missed a catch and the ball smashed into my eye.  It hurt!  And it bruised.  I sat down for a while but was back out on the field for the next session.  I didn’t go home and no one called my mother.  The coach asked “Are you OK?”

One day a poor girl in the Girl Scouts was walking around and selling cookies, when a young man lured her into his house and raped and killed her, a few blocks from our house in Hillsdale.  They organized a Frankenstein-like village hunt, found the girl’s body, and traced it back to the guy, who was sent to jail and remains there to this day.  This didn’t change any of the local norms.

Maybe it’s still all like this, I cannot say.

Did Keynes favor planning?

by  Tyler Cowen in

Barkley Rosser and Brad DeLong say no, but it depends on definition and context. Barkley tries to talk his way out of it, but Keynes in the General Theory did advocate “a somewhat comprehensive socialisation of investment.”  “somewhat” — that’s my kind of weasel word!  In any case this was not the same as classical central planning circa 1920, but in a rap video I consider that acceptable license.  By my count “central plan” comes up once in a ten-minute video and most importantly Keynes does not accept the characterization but rather responds that the debate is about spending.  The video is not suggesting that each and every rapped point is true at face value, and if the two characters seem to debate past one another that too reflects the reality at the time.

Also consider another piece of evidence, namely the Keynes-approved preface to the German-language (uh-oh) edition of the General Theory:

Nevertheless the theory of output as a whole, which is what the following book purports to provide, is much more easily adapted to the conditions of a totalitarian state, than is the theory of the production and distribution of a given output produced under conditions of free competition and a large measure of laissez-faire.

Points in response are: a) Keynes does not seem to actually favor the German system, even if he thinks it is better suited to Keynesian doctrine, b) the Nazi system was not “central planning,” and c) this was written in 1936 before the worst acts of the Nazi state, planning or otherwise.

Nonetheless, in Keynes’s time enthusiasm for significant socialistic planning was common.  Keynes had it too, at least for a while in the 1930s.  It was a milder planning than the worst ideas circulating at the time, but it’s fair game to contrast it with the anti-planning sentiments of Hayek.  Can you imagine Hayek writing a preface like that?  I don’t think so.

Assorted links

by  Tyler Cowen

1. Why is this an equilibrium (video of cheetahs)?

2. The real Hayekian answer should be, and sometimes was, nominal gdp targeting, to minimize price distortions.  There is much more on Hayek and nominal gdp here (pdf).

3. Via Chris F. Masse, Pepsi Social Vending System Spam Markets in Everything.  Egads, can’t you just buy a soda?  What’s wrong with monetary exchange?

4. Extending Tim Harford’s idea, are economic facts disappearing (Hernando de Soto)?

5. Brazil is massively violating PPP, I can attest to this.

The spiral in health care costs

by  Tyler Cowen

It affects many different nations:

The American Pet Products Association estimates that Americans will spend $12.2 billion on veterinary care this year, up from $11 billion last year and $8.2 billion in 2006.

And this:

Pet health insurance is a booming industry, growing more than 20 percent every year, although only an estimated 3 percent of pet owners have bought policies.

First, at least at low levels of cost, relying on out of pocket expenditures isn’t controlling cost growth.  Second, the insurance is available to begin with, albeit with restrictions:

But like health insurance for humans, pet insurance can be complicated and highly restricted. Some policies will not cover older pets or genetic conditions that certain breeds are known to have, such as hip dysplasia in retrievers.

Others limit coverage to only one treatment per illness. So if your dog develops asthma, for instance, some policies will cover just the first trip to the vet although treatment will require multiple visits.

Is this what free market health insurance would look like for older humans?  The full story (1/20) is here.

Here is the pet health insurance blog.  September is pet health insurance month.  Here is a question I had never heard before:

Have you ever forgone health insurance for yourself to cover your pets?

*Adapt*, by Tim Harford

by  Tyler Cowen

I was excited to read Tim’s book because I have been thinking about similar issues.  He explores the fact that the division of labor, and division of knowledge, keeps on progressing, and that such progress brings surprising and sometimes frustrating results.  He starts with a vivid anecdote about how hard it is for a single person to invent a toaster:

The toasting problem isn’t difficult: don’t burn the toast; don’t electrocute the user; don’t start a fire.  The bread itself is hardly an active protagonist.  It doesn’t deliberately try to outwit you, as a team of investment bankers might; it doesn’t try to murder you, terrorise your country, and discredit everything you stand for…The toasting problem is laughably simple compared to the problem of transforming a poor country such as Bangladesh into the kind of economy where toasters are manufactured with ease and every household can afford one, along with the bread to put into it.

Tim remains a wonderful expositor and popular economics writer but this is also a book of ideas, and it is ahead of what most other people are thinking.  One implication is that greater specialization makes innovation much harder — hardly anyone has a good grasp of the whole — and Tim cites the work of Benjamin Jones.  Another implication is that we must rely more on particular kinds of experimentation to make progress on hard problems.  This is all taking Michael Polanyi and Hayek and Whitehead and Ortega y Gasset and turning the heat up a notch; we are increasingly alienated from a knowledge of the whole and yes that matters.

Ultimately Tim shies away from making this a book of breakdowns, but I would have enjoyed seeing him postulate a Don van Vliet Trout Mask Replica equilibrium and then trying to put the pieces back together again.  Is there some non-linear point at which some institutions can no longer be reassembled in working form?  There is plenty of material on this question, but perhaps not quite a full confrontation with pessimistic scenarios.  That will have to wait for the sequel.

The bottom line: I was never reading this because it will be popular and I wanted to review it, I was always reading it to ponder the ideas.  You can buy the book here.

Mexico facts of the day

by  Tyler Cowen

From the Mexican census, via Andrew Sullivan:

In 1990, one in five dwellings had a bare-earth floor. Now only 6% do. … More interesting still is what Mexicans put in those homes. More houses have televisions (93%) than fridges (82%) or showers (65%). In a hot country with dreadful television this is curious.

I don’t find this puzzling at all.  A lot of Mexico has elevated altitude and many of the homes are open air.  Mexican TV is more fun than taking a shower, too.

MaLa Tang

by  Tyler Cowen in

It is on 3434 Washington Boulevard, in Arlington, adjoining the George Mason University School of Law buildings (with Mercatus and School of Public Policy and ICAR), home page here.  It is real Sichuan hot pot, excellent flavors all around, reminiscent of Uncle Liu’s Hot Pot (same owner), superb cold dishes and appetizers, and the best MaPo Tofu in the entire area.  They’ve made the decor chic, the wait staff “normal,” and you can just walk up to a counter and get ready-to-eat Sichuan street food to your heart’s content on a moment’s notice.  I predict this will serve  as a major breakthrough for real Sichuan food in northern Virginia and also in the United States.  Here is one good review.

File under “Now Open for Business.”