Tuesday assorted links
1. Esther Duflo’s Ely lecture, “The economist as plumber.”
2. Disappearing markets in everything: the last disco ball maker (there is noisy sound at the link). And how bad is authoritarianism really? And David Brooks on Bannon vs. Trump, I am always happy to see actual analysis of the Trump administration.
3. The best economic history works in the last decade? (pt. I)
4. AI now wins in heads-up, no-limit Texas hold’em poker. That is a game of asymmetric information.
5. The books some Australian guy is looking forward to.
6. If they had served this up as parody, I would have thought it too exaggerated. Did Darwinian processes really produce this? I guess so.
7. Long Piketty blog post on productivity in Germany and France. It does seem he is now blogging in English (and French) for Le Monde.
The tenth anniversary of the iPhone
Here is what I wrote in 2007, when Prospect magazine asked me to name the most underrated cultural development of the year:
The iPhone. The world really did change…We now have handheld personal computers and personal entertainment centres, yet they are no larger than a thin pack of cards. And no, I’m not a techie, a gadget freak or an Apple lover. The device itself is beautiful as well.
And here was my “overrated” answer:
Overrated: Hollywood movies. US ticket sales recovered this year, but to what end? This was a year for microculture, such as Facebook, Twitter and YouTube. The bigger visual productions of the year won’t much stand the test of time. On the bright side, television drama continues to rise in quality.
I am pleased to have bought an iPhone on the first day, I felt at the time it was like seeing the premiere of a Mozart opera. Many people laughed at me for suggesting such an analogy, and they chided me for my infatuation with such a toy. I recall Alex walking into my office, asking me what I thought, and I told him the product really did deliver what it promised and that it would change the world.
The funny thing is, I hardly use my iPhone anymore, much preferring the larger iPad. I haven’t even bothered to order one of the larger iPhones, as for me it isn’t large enough and I marvel that others can use it as much as they do. In other words, now that I have experience using the product my forecast, if I were to make one historically “blind,” but with that accumulated personal experience in pocket, would be far less accurate than what I said at the time.
Is capital share declining because mark-ups are rising?
From Simcha Barkai at the University of Chicago (pdf):
This paper shows that the decline in the labor share over the last 30 years was not offset by an increase in the capital share. I calculate payments to capital as the product of the required rate of return on capital and the value of the capital stock. I document a large decline in the capital share and a large increase in the profit share in the U.S. non-financial corporate sector over the last 30 years. I show that the decline in the capital share is robust to many calculations of the required rate of return and is unlikely to be driven by unobserved capital. I interpret these results through the lens of a standard general equilibrium model, and I show that only an increase in markups can generate a simultaneous decline in the shares of both labor and capital. I provide reduced form empirical evidence that an increase in markups plays a significant role in the decline in the labor share. These results suggest that the decline in the shares of labor and capital are due to an increase in markups and call into question the conclusion that the decline in the labor share is an efficient outcome.
For the pointer I thank David Levey.
Best classical music recordings of 2016
I found it to be a remarkably deep year for recordings, against all economic odds. I could easily go twenty deep with little loss of quality, but these are the few that stood out for me:
The Complete Songs of Virgil Thomson for Voice and Piano, by the Florestan Recital Project. This release wins the prize for “music I didn’t really know existed before.” Here is one stellar review.
Inspired by Brahms: Music for Horn Trio, including works by Ewazen, Kellogg, and Brahms. After German Requiem, the Horn Trio is perhaps my favorite work by Brahms.
Brahms Lieder and Liebeslieder Waltzes, by Andrea Rose, Thomas Quasthoff, et.al. Finally a rendition as good as the classic Vronsky/Babin recording.
Domenico Scarlatti Sonatas, by Angela Hewitt. This is the recording I feel most comfortable recommending to most of you.
Franz Liszt, Transcendental Etudes, by Danil Trifonov. Probably the most widely and best reviewed release of the last year, here is some background information on the etudes.
Rêve d’un Enfant, works by Franck, Ravel, and Ysaÿe, by Sophie Rosa and Benjamin Powell, the Franck is especially fine.
Mozart, Don Giovanni, conducted by Teodor Currentzis. I never thought I would be swept off my feet by an original instruments performance of this opera, but there you go. From Gramophone:
…briskly paced, crisp, bristling attacks – it is also unlike anyone else’s take on the great opera. It isn’t weird or eccentric; everything feels just right. What separates it from the crowd is the depth of attention which is applied to every detail, the profoundly imaginative shaping of each and every phrase, and the extraordinary, razor-sharp precision of the ensemble playing. The stuff, in other words, that everyone else would like to do, but doesn’t know how. The singing, in accordance with Currentzis’s beliefs – and others in the HIPP world – is a touch “lighter” than usual: less “operatic”, more “natural”, if there is such a thing. All the roles are superbly sung (including a best-ever Don Ottavio) and the recording is rich, warm and finely detailed.
That’s the one that wins my top prize.
Also new on my discovery list were the string quartets of Ben Johnston and also Robert Simpson, although these were not generally new recordings. I listened to plenty of Haydn, rediscovered Idomeneo, for some reason was a bit bored by Beethoven, and rued the passing of Pierre Boulez.
Apple accessory markets in everything
A Candle That Gives Off The Scent Of Freshly Unboxed Apple Products
It is 100% soy wax, in case you are wondering.
The pointer is from Ted Gioia.
From the comments, on the new Republican tax plan
The non-deductibility of imports is simply crazy. It will immediately increase inflation. Take IKEA, for example, they cannot source locally, they will increase prices immediately by 20%, or whatever the tax will be. At all effects, it is a flat tariff of 20% on every import. This guy seems to want to transform the US into North Korea. And think about the distortions: Boeing will become a purchasing company, making more money using the tax-credit to buy prosciutto and Camembert to sell to retailers at prices lower than the marginal cost, than producing planes.
That is Coasean reasoning from Massimo, there are other good comments as well. For instance Bob noted:
There will be a huge move to asset based leasing. So Wal-mart, instead of borrowing money will sell thier real estate to a REIT and lease it back. They essentially can keep the deduction.
Computer bot sentences to ponder
…as pricing systems become ever more autonomous, aspiring monopolists like Mr Topkins eventually will not even need to speak to their competitors to fix prices. Computers will do the colluding for them, either by using the same algorithm or learning from their interactions with other machines — all without leaving behind trails of incriminating emails or voicemails.
“Finding ways to prevent collusion between self-learning algorithms might be one of the biggest challenges that competition law enforcers have ever faced,” said a recent paper by the OECD, the Paris-based club of mostly rich nations.
These digital tools automatically calculate prices based on instantaneous assessments of supply and demand and a seller’s own instructions, such as specific profit or price targets.
…It [the OECD] added: “Particularly in the case of artificial intelligence, there is no legal basis to attribute liability to a computer engineer for having programmed a machine that eventually ‘self-learned’ to co-ordinate prices with other machines.”
That is from David J. Lynch at the FT. Will this prove more or less stable than traditional, human-based collusion? Here are comments from Henry. Can the bots send buyers “we are breaking the collusion now” alerts? Will monitoring third party bots perform that function? Or will collusion reign supreme?
Monday assorted links
1. Some Indian kidnappers accept online (non-anonymous) payments.
2. Do men get more credit for co-authored economics papers than do women? Here is the home page of researcher Heather Sarsons, which includes a link to the paper.
3. “If this book has one thesis, it’s that America suffers from a surfeit of representation, and a deficit of administration.” — that is from Parag Khanna, drawing from his new book Technocracy in America.
4. Do politicians on the Right look better?
6. Obama vs. Trump on health and science policy. And Will Baude on the ambiguities of the emoluments clause. And how Trump will manage his Cabinet, or not.
When should the federal government own land?
Public land would be interesting.
That was a request for topic coverage from Ryan, from last night. Here is a 2014 CRS survey piece with good background information.
I can think of a few reasons for federal government ownership of public land:
1. For some specific purpose, such as a national park or a nuclear weapons facility or the White House.
1b. There is a conservation argument for land holdings, but again I think it has to be for a specific purpose, thus collapsing into #1 proper.
2. As a revenue-maximizing strategy, a’la Irvine Company, so the government can sell off pieces of land successively, over time, to take in more revenue than if it sold off everything all at once.
3. To hold land off the market and thus force more people to squeeze into cities, thereby reaping extra returns to scale and density, shades of Edward Gibbon Wakefield.
4. To limit rent-seeking games, since much of the land might be low value in the present, but a race to homestead it would consume resources. In the longer run, that homesteading race would lead to suboptimal owners, since we don’t now know exactly what the land will be good for.
5. It’s the only way we can run an asset surplus, since cash would be grabbed by the political process and redistributed. Think of it as akin to those poorer villages where you save in the form of cows or pigs, because your uncle cannot come to you when he needs to fund a wedding and demand a piece of the pig.
I say #1 is unproblematic and can be decided on a case-by-case basis. #2 is fine if the government were doing that, but they’re not. #3 would seem to require much more federal ownership of land than what we have. It’s still much, much cheaper to live in Idaho. #4 is an OK argument, but I don’t see why it would apply to properly done land auctions, which is indeed how federal disposal of the land has evolved.
So #5 is actually the main argument, at least once we get past #1.
Overall, I don’t see why the federal government needs to own about 28% of the country. Nonetheless, in the meantime the government does allow grazing and mining to take place on those lands, often at below-market rents. (By the way, for now I am putting on hold a possible #6: “federal land ownership is the most efficient way to regulate mining and fossil fuel extraction.” It raises issues far beyond the scope of the current discussion, though it is significant.)
You will note that the federal government owns 47% of the land in “the West,” but only 4% of the land east of the Mississippi. Unfortunately:
Congress in 1976 passed a law declaring that “the remaining public domain lands generally would remain in federal ownership.”
Though note a few days ago the House acted to ease land giveaways, so this may be changing. Yet I feel no great thrill at simply giving this land to the state governments, though that may be an intermediate step toward privatization.
I would prefer to lower the percentage of federal land ownership in the West, but in the meantime I don’t see this as an incredibly pressing issue. The government can either waste some of your land or some of your money, take your pick. I do think the gdps of Nevada and Idaho could be higher, just not by that much. Alaska may be a story of its own.
Larry Summers on the new Republican tax plan
He summarizes the plan as follows:
The central concept put forward by Mr Ryan, which appears to have the support of Mr Trump, is to turn corporate income tax from a tax on the return to capital into a tax only on extraordinary profits. This would be done by taxing corporate cash flows. In addition to the major reduction of the overall rate, the system would change in three fundamental ways. First, all investment outlays can be written off in the year they occur rather than over time. Second, interest payments to bondholders, banks and other creditors will no longer be deductible. Third, companies will be able to exclude receipts from exports in calculating their taxable income and will not be permitted to deduct payments to foreign suppliers or affiliates from income.
I found this to be the paragraph I had not seen elsewhere:
Second, the tax change will capriciously redistribute income, increase uncertainty and place punitive burdens on some sectors. Think of a retailer who imports goods from abroad for 60 cents, incurs 30 cents in labour and interest costs, and then earns a 5 cent margin. With a 20 per cent tax, and no ability to deduct import or interest costs, the taxes will substantially exceed 100 per cent of profits even if there is some offset from a stronger dollar. Businesses that invest heavily, hire extensively and export a large part of their product will have negative taxable income on a chronic basis. It is hard to imagine that the political process will allow annual multibillion-dollar refunds, so they too may be victimised. Then there are the still unresolved questions of what the rules will be on interest deductibility for banks and of the treatment of businesses organised as partnerships that do not pay corporate taxes.
Here is the FT link, probably gated for most of you, WaPo link here. Summers also argues the plan will worsen inequality, strengthen the dollar (possibly leading to EM crises), lead to a trade war, and erode the long-term tax base.
Just to refresh your memories here is Jared Bernstein on the same plan (mixed but mostly negative), and Martin Feldstein (positive).
Request for requests
Are there any particular topics or questions you would like me to blog about? I make no promises!
Sunday assorted links
2. Martin Feldstein favors the border tax adjustment plan (WSJ).
3. A theory of political cycles, as applied to Trump.
4. In the Borjas model, immigrants boost French wages.
5. Who are the top unreliable narrators? (a few names were left out…)
Might The Great Stagnation end with The Great Medication?
That is the topic of my latest Bloomberg column, here is the last bit:
I don’t mean to say that technological stagnation is a good thing. But sometimes the biggest advances lead to more tragedy than comfort, especially in the short run, before we learn how to adjust to their challenges. To paraphrase Peter Thiel, they promised us flying cars, and what we got was a bunch of stoned characters, and more than 140 of them. Beware the end of the productivity slowdown.
Do read the whole thing.
Faux Quebec village markets in everything
Canadiana Village, about an hour north of Montreal near Rawdon, Que., has been on the market since the fall. The nearly 60 hectares of land and 45 buildings are going for $2.8 million.
The village is designed to resemble a pioneer settlement from the 19th century, and includes a church, a general store, a mill, a cemetery, a saloon and 22 houses.
However, most of the buildings are just for show.
…”There’s only one livable home.”
Kaija said most of the buildings were shipped to the village over the years.
In its heyday, the village welcomed close to 30,000 tourists per year and was a popular destination for school field trips.
It was also featured in more than 110 film and TV productions, including Radio-Canada’s Pays d’en haut and I’m Not There, a Bob Dylan biographical drama.
Here is the full story, with photos, and for the pointer I thank Michelle Dawson.
Euro sentences to ponder
The point is that a country like Italy or Greece is not trapped by being in the euro. It could increase its competitiveness by raising value-added taxes on consumption and cutting payroll taxes.
That is from Arnold Kling, channeling Gita Gopinath. The interview with her at the link is worth reading.