My scuffle with Matt Yglesias

by  Tyler Cowen in

“Why is the Rent So Damn High?”, you can watch the video here:

I should note that the debate nature of this video is for instructional purposes, and I do in fact agree with Matt more than I let on in the exchange itself.  We also debate cities vs. suburbs, and you can guess which side I take on that one, no preference falsification there!

Here is a Soundcloud podcast version, here is iTunes.

Venezuela fact of the day not what Kimball and Rogoff had in mind

by  Tyler Cowen in

Here is the background:

The Venezuelan government has announced it will remove the country’s highest-denomination banknote from circulation within 72 hours to combat contraband.

Central bank data suggests there are more than six billion 100-bolivar notes in circulation, making up almost half of all currency.

Venezuelans will have 10 days from Wednesday to exchange the notes for coins and new, higher-value bills.

President Nicolas Maduro said the move would stop gangs hoarding the notes.

Here is the fact:

Mr Maduro said on Sunday that the 100-bolivar note, worth about 2 US cents (£0.015) on the black market, would be taken out of circulation on Wednesday.

Emphasis added, and for the pointer I thank Philip Steinmeyer.

Modeling Donald Trump as a deal-maker

by  Tyler Cowen in

Imagine a politician who had trading in his utility function, and furthermore used some intertemporal price discrimination analogies from real estate — what might that look like?  That is the topic of my latest Bloomberg column, here is an excerpt from the latter part of the piece:

If those trades take up much of the legislative calendar over the next year or two (while the Republican majority remains secure), what might Trump then do next? He hardly seems like a caretaker president or someone who would enjoy presiding over gridlock.

Like a good real estate magnate, the next step then would be to turn to the lower valuation buyers – namely the Democrats in Congress – and offer them some lesser deals at lower prices. The Democrats are the buyers who will value dealing less because many (but not all) of their voters are less enthused about working with Trump, and also they value less what Trump might plausibly offer. Still, there will be room for further exchange.

If Trump, perhaps working with his daughter Ivanka, crafted a reasonable federal child-care or preschool policy, many Democrats would jump on board. They wouldn’t become Trump supporters in return, but they would moderate their criticism, as they would have a victory to take home to their voters.

In short, the second half of the Trump administration might consist of Trump offering a series of smaller but still significant trades to Democrats, taking care to bring along some Republican votes as well.

And what might the final fire sale consist of? Imagine Trump in his fourth year, essentially running for re-election as an independent, feeling he has nothing to lose and intent on showing that he has broken gridlock. Imagine a Trump whose ideology remains fluid and who loves to make deals more than to adhere to an ideological line. Could he also “sell” climate change legislation and a higher federal minimum wage to Democrats and a smattering of swing-district Republicans?

That is just one scenario, not an absolute prediction, but it would mean lots and lots of policy change under Trump.

Prizes are flourishing

by  Tyler Cowen in

Stumped for solutions to hundreds of industrial and technical problems, businesses and governments alike are turning the search for innovative ideas into prize-worthy puzzles that capitalize on the ingenuity of the crowd.

At a time when the pace of innovation seems to be slowing, prize sponsors hope that today’s hackers and makers can step into the breach and jump-start progress in a way that today’s research institutions—with their many constituencies and restraints—are struggling to do.

Improve smartphone voice recognition? There’s a $10,000 prize for that. Design a delivery drone? $50,000. Extend the human lifespan? Venture capitalist Dr. Joon Yun offers the $1 million Palo Alto Longevity Prizes. Diagnose antibiotic resistance? That’s worth $20 million. And if anyone can profitably repurpose the carbon emissions involved in global warming, there are prizes totaling $55 million in the offing.

“You name it, there is a prize for it,” said Karim Lakhani at the Harvard Business School’s Crowd Innovation Lab, who has helped run 650 innovation contests in the past six years.

In addition, crowdsourcing companies such as InnoCentive Inc., NineSigma, and Kaggle have posted hundreds of these lucrative research contests on behalf of corporate and government clients, offering cash prizes up to $1 million for practical problems in industrial chemistry, remote sensing, plant genetics and dozens of other technical disciplines. Among them, the three companies can draw on the expertise of two million freelance researchers who have registered for access to the prize challenges.

All told, more than 30,000 significant prizes are awarded every year worth $2 billion and growing, according to McKinsey & Co. The total value of purses from the 219 largest prizes has tripled in the past 10 years. Not only are there more prizes than ever, but nearly 80% of all the major new prizes announced since 1991 are designed to spur specific innovations.

Yet here is a cautionary note:

To be sure, there is little evidence that crowdsourcing competitions have significantly altered the innovation landscape yet. “Prizes are important, but they are not the ultimate incentive for innovation” said Luciano Kay, a research fellow at the University of California at Santa Barbara who studies incentive prizes. “They are not big enough to change how industry works in general.”

Here is the full Robert Lee Hotz WSJ article.  Here are previous MR posts on prizes.  Here is an MRU video on prizes.  Here is my 2007 talk at Google on prizes as a means of funding innovation.

For the pointer I thank Ray Lopez.

Monday assorted links

by  Tyler Cowen

1. Why it matters whether China is labeled “a market economy” in trade talks.

2. A guide to the new Progressive federalism.  And how do you describe a hockey game in Innu?

3. I am delighted that Joe Nocera is coming to Bloomberg View.

4. Bengt Holmstrom’s Nobel Lecture.

5. Classical musicians pick their favorite Mozart works.

6. Profile of George Borjas.

7. John Cochrane’s new and long paper (pdf) on interest rates and the fiscal theory of the price level.  I hope to read it soon.

8. Baltic stocks still doing fine.

The Revolution Has Begun: Beyond Meat

by  Alex Tabarrok in

Animal rights will be the big social revolution of the 21st century. Most people have a vague feeling that factory farms aren’t quite ethical. But few people are willing to give up meat so such feelings are suppressed because acknowledging them would only make one feel guilty not just. Once the costs of giving up meat fall, however, vegetarianism will spread like a prairie wildfire changing eating habits, the use of farm land, and the science and economics of climate change.

Lab grown or cultured meat is improving but so is the science of veggie burgers. Beyond Meat has sold a very successful frozen “chicken” strip since 2013 and their non-frozen burger patties are just now seeing widespread distribution in the meat aisle at Whole Foods. Beyond Meat extracts protein from peas and then combines it with other vegetable elements under heating, cooling and pressure to realign the proteins in a way that simulates the architecture of beef.

I picked up at two-pack on the weekend. Beyond Meat burgers look and cook like meat. But what about the taste?

beyondbeef1

The taste is excellent. The burger has a slightly smokey taste, not exactly like beef but like meat. If you had never tasted a buffalo burger before and I told you that this was a buffalo burger you would have no reason to doubt me. A little sauce and salt and pepper and this is a very good-tasting burger not a sacrifice for morality.

The price is currently more than beef, $6 for two patties but that’s Whole Foods expensive not out of reach expensive. I will buy more.

The revolution has begun.

beyondbeef2

The second picture is the BuzzFeed version. My burger wasn’t quite so artfully arranged but was still delicious and I attest to the overall accuracy.

Addendum: 20 g protein: 6 g carb: 22g fat (5g saturated).

Best albums of 2016

by  Tyler Cowen in

You can’t call it “rock and roll” anymore, because rock and roll is dead for the most part.  Nor is the phrase “popular music” appropriate, because a lot of it isn’t popular, or occasionally other forms are popular too.  I say phrases these days are determined by Google search, and if you google “best albums 2016” you get to the kind of list I am talking about.  My main picks are:

Beyonce, Lemonade as a clear first choice.  Runners-up make it three women at the top:

Mitski, Puberty 2, and Angel Olsen, My Woman.

I thought the contributions by Kanye West and Frank Orange mostly delivered, but were not their very best material, and I don’t think I will be listening to those works two or three years from now.  The albums by the old guys and also by the dead guys were pretty good, but ultimately sentimental picks and I refuse to make these lists about sentiment.  The album from last year I found myself still listening to more than I had expected was Small Town Heroes, Hurray For the Riff Raff.

What am I missing?

Here are my earlier picks for world music in 2016, classical and jazz selections will follow soon.

The fiduciary standard for financial advisors actually may increase fees and commissions

by  Tyler Cowen in

…ditching the fiduciary rule may actually be a good idea. While it’s vital that advisors give advice we can trust, the fiduciary rule doesn’t give advisors an incentive to do that. It may even lead to worse financial advice.

We know this from the the 401(k) market, where plan sponsors (often your employer) act as a fiduciary for your 401(k) retirement fund. Despite the standard, most 401(k) participants are invested in the kind of high-fee investment funds that fiduciary-standard-supporters hope to avoid.

In the 401(k) industry, many sponsors don’t want the liability of being a fiduciary. They often hire consultants and advisors hoping to to lessen their liability. This racks up even more fees, which are passed on to participants.

One reason the fiduciary standard doesn’t work is because “best interest” is a vague term. The retirement industry still hasn’t figured out what it means, let alone regulators. It could mean low fees. (Certainly there’s a good case to invest in low-cost passive funds.) But sometimes you pay fees in exchange for risk reduction, as you might with a simple life annuity that protects you from running out of money after retirement.

…The retirement industry is still grappling with all of these questions. The fiduciary standard makes it harder to find the answer because the threat of lawsuits discourages innovation. Skirting liability often becomes the main objective, rather than focusing on good advice that serves individual needs. A survey from AON-Hewitt cites the fiduciary concerns as a primary reason why 401(k) sponsors are reluctant to even offer the post-retirement income options new retirees need.

Here is more from Allison Schraeger.

What I’ve been reading

by  Tyler Cowen in

1. Michael Lewis, The Undoing Project: A Friendship that Changed Our Minds.  A super-fun but oddly uneven biography of Kahneman and Tversky, a meditation on the nature of collaboration, and a history of the early stages of behavioral economics (economics?) and for that matter a history of Israel in some of its early decades.  There are cameos from Rapaport, Thaler, Gigerenzer, and others.  Why did the Israelis take so readily to the idea of an economic psychology, compared to the Anglos?

2. Michel Faber, Undying: A Love Story.  The pages are arranged like poems with stanzas, but it reads more like prose.  It is the moving story of the death of Faber’s wife by cancer, very short and interesting throughout.  So far published only in the UK.

3. Robert R. Reilly, Surprised by Beauty: A Listener’s Guide to the Recovery of Modern Music.  A highly useful and to the point guide to classical music for the periods you probably do not listen to.  It is strongest on the “intermediate” composers, such as Vagn Holmboe, Robert Simpson, and Edmund Rubbra.  It makes a persuasive case for the 17 string quartets of Heitor Villa-Lobos, we’ll see if that was $40 well-spent.

4. Karl Ove Knausgaard and Fredrik Ekelund, Home and Away: Writing the Beautiful Game.  This book is a series of letters, mostly about soccer.  They are more substantive than you might be expecting, but still you have to love both Knausgaard and soccer to enjoy this one, on those I am only one for two.

5. Richard Florida, The New Urban Crisis. Staying ahead of the Curve.  This is about how cities are failing the middle class throughout much of the world.  At the same time, suburbs are seeing a new poverty and urbanization is not always translating into rising living standards around the world.  This book is where the problems of urban economics “are at” right now.

Sunday assorted links

by  Tyler Cowen

1. Good thread on Tillerson.  Steve Coll tries to make Tillerson sound bad, I am not sure he succeeds.  Here is Rob Stavins on Tillerson.  I disagree with what seems to be Trump’s intended Russia policy, but I’ve known plenty of businessmen who have done deals with unpleasant foreign powers and I have never doubted their loyalties to the United States.  I see those issues being blurred and smushed together in a new kind of odd reverse McCarthyism.

2. Redux of my earlier post “Modeling Vladimir Putin.”

3. Westworld and the American Civil War.

4. “A person born in 1940 was, by the time he was 30, close to his peak earning point. A person born in 1980, by the time he is 30, is further away from a higher peak earning point. Thus, you are not comparing the same type of birth cohorts.”  Link here, and a bit more here.

5. “”I put out early,” she says.”  (NYT)

6. Niall Ferguson switches to supporting Brexit.

7. Oliver Hart Nobel Prize lecture.