Is China recovering?

by  Tyler Cowen in

The new gdp figure came in at 6.7%.  No matter what you believe “the real number” to be, this is probably more important:

Chen Xingdong, China chief economist at BNP Paribas, notes that first quarter growth was bolstered by industrial production, fixed-asset investment and an “astonishing” acceleration in construction starts while service sector growth moderated. That is exactly the opposite of what is supposed to be happening. “The pick-up in SOE investment and slowdown in private sector investment will cause problems for structural change,” Mr Chen said.

The first quarter this year also saw record credit expansion in China, even though most economists believe the country needs to be deleveraging. Here is David Keohane citing Wei Yao:

In Q1, increases in total credit exploded to CNY7.5tn, up 58% yoy and equivalent to 46.5% of nominal GDP – one of the highest ratios ever. Credit growth accelerated to 15.8% yoy to end-March, the quickest pace in 20 months.

Also from the FT (see the first link) is this:

Meanwhile, the “Mr Li got lucky” argument suggests that the most powerful player is not the country’s much feared president, Xi Jinping, but rather Janet Yellen, chair of the US Federal Reserve. According to this theory, Ms Yellen’s pause on US rate rises saved China from what looked like the beginning of run on the renminbi and Beijing’s foreign exchange reserves, which fell precipitously in January and February.

These falls moderated only after the Fed suggested it would not raise interest rates as aggressively as it had indicated late last year.

“The Fed’s reversal has taken a lot of pressure off the renminbi and without the currency looking like it’s going to collapse, people are feeling better,” said one Asian investment strategist, who asked not to be named.

The simplest China model for 2016 is this.  Due to the prevalence of SOEs and state influence in the economy, the country can in fact (for now) achieve almost any gdp target it wishes, at least within reason.  But it trades off the quantity of gdp for the quality of gdp, and this time — again — the Party opted for the relatively high growth figure.  That is bad news, not good news.

Here is an unpacking of some parts of the gdp number.  Here is Nerys Avery.

Are workaholics a danger to society?

by  Tyler Cowen in

The Economist’s new 1843 periodical asked me to write a short theme on that question, here is the result:

Work? What is work anyway? I’m a writer on economics and thus also a reader.  I don’t find writing to be so hard, but I need something to write about and that means reading. For me, working more means reading more. And you know what? Working less also means reading more. It does however mean reading different things.

If I worked less, I would read more fiction and less non-fiction. Is that such a bad thing? Perhaps the fiction enriches me more as a human being, but I enjoy reading the non-fiction (including The Economist) just as much, sometimes more.

Plus I get paid, usually indirectly, for absorbing non-fiction material, playing with the ideas, and converting them into content for others. I enjoy earning that money, and spending it.

Also, most fiction isn’t that good. In fact, it isn’t even true. Or if it is true, it is true by coincidence or accident. That’s not a complaint, but I don’t see why I should give up cash income for the privilege of giving up reality. Can it be such a winning bargain to give up cash and reality at the same time? It’s not, and I won’t. Unless it’s Star Wars or Elena Ferrante.

Otherwise, see you at work.

Tyler Cowen, George Mason University

Here is the whole symposium, which includes Diane Coyle and Daniel Hamermesh.  This was all inspired by Ryan Avent’s excellent recent essay on work-life balance.

“A question of privilege”

by  Tyler Cowen in

An excellent short essay by Marti Leimbach.  Here is the opening:

My university-aged daughter is always tell me about the “privilege” that people like me have and how it makes it impossible for me to understand and empathise with those whose lives are without such privilege. I do see her point. I’ve never been black or gay or trans- or gender queer or mentally ill.  I don’t know what it would be like to grow up in a derelict building in a dangerous neighbourhood, to have drug addicts for parents, to fear for my safety while walking to school, to be openly despised for being female, denied education or refused employment based on  my skin colour or gender. And while I am have been poor enough not to be able to afford a car or health insurance, I have never been so poor I had to steal food. Clearly, I’ve not suffered the worst of what society can throw at a person.

Nonetheless, this whole notion of  “privilege” vexes me. We talk about it as though we can all recognise what it is. I am not always so sure. I can tell one narrative of my life and it seems to describe someone who grew up without privilege, and I can tell another narrative and it seems almost as though my life was one of ease and privilege from the time I was born.

The story continues…it is hard to excerpt with its various twists and turns, definitely recommended…

Here is her forthcoming novel,The Age of Consent.

Interview and podcast with me, about on-line education

by  Tyler Cowen in

By Jeff Young at the Chronicle, here is one excerpt:

Jeff Young: …I asked Cowen what has surprised him most as his effort has evolved.

Tyler Cowen: I wouldn’t quite call it a surprise, but I’ve been consistently impressed over the last 10 years, more than 10 years, if you make consistently smart content on the Internet, whatever form, there is an audience there. Whether it’s MOOCS or blogs or whatever, YouTube, there really are people just hungry for stuff. How far you can push them is really impressive.

They don’t have to get every bit of it to take away a lot, and for you to give like your heart and soul, like here’s what I think is the important version of the topic, is better to, like, “Oh, are they going to understand this term?” or “Can I say elasticity?” or “Do they know this?” I think it’s a little bit of poison when you think too much that way. I’m not saying overwhelm them with words they don’t know, but if you believe in the material, I think a lot of them are going to get it. It’s like one thing I’ve really learned.

And this:

TC: …People have learned economics is about a debate, and in fact we have a new class of video. The first one just went up an hour ago. Alex and I debate education. How much is it signaling, and how much is it you actually learn?

Jeff Young: Wow. You mean university education?

Tyler Cowen: Yeah, to teach topics as a debate is an underexplored method, and we’re going to do more of this, so look at that video. It’s just Alex and I. We talk to each other. We sort of call each other names in good humor. The idea is that people maybe learn better through conflict.

You know you get some dry presentation, you sort of vaguely nod, but you never know what’s really at stake here. If you don’t know what’s at stake or why someone might disagree, maybe you don’t understand it. To try to teach this way, we’ll see how they’re received, but it’s one of the things we have coming next.

Do read the whole thing, or listen.

Claudio Borio and co-authors on secular stagnation and what the real problem is

by  Tyler Cowen in

From VoxEU, with Enisse Kharroubi, Christian Upper, Fabrizio Zampolli:

But what if, in addition to the persistent – but not structural – hole in aggregate demand a financial bust inevitably generates, a key part of the true story has less to do with the level of aggregate demand than with its composition and impact on the structure of supply? What if what some see as a rather disappointing pre-crisis US growth performance despite a strong financial boom was actually disappointing, in part, precisely because of that boom? What if the protracted post-crisis weakness reflects in no small measure the difficulties in correcting the resource misallocations that accumulated during the previous financial boom and emerged once a financial crisis subsequently broke out?

This is indeed what we conclude by examining the experience of 21 advanced economies over the last 40 years (Borio et al. 2015). The hitherto unsuspected villain in this story is the misallocation of resources – in our case, labour – during the credit boom and its long post-crisis shadow. More generally, the findings support the view that the disappointing developments we have been witnessing may be the result of a major financial boom and bust that has left long-lasting scars on the economic tissue (e.g. BIS 2014, Borio 2014, Borio and Disyatat 2014, Rogoff 2015) rather than the reflection of a structural, deep-seated weakness in aggregate demand.

Here is the full article.

Tyler Beck Goodspeed on Scottish free banking

by  Tyler Cowen in

His new book is titled Legislating Instability: Adam Smith, Free Banking, and the Financial Crisis of 1772.  From Harvard University Press, here is one summary bit:

The central argument of my thesis is thus that the salient financial crisis of the Scottish free banking period, the obtrusive exception to the hypothesis of greater financial stability under free banking in Scotland,was, pace Adam Smith, made more rather than less likely by precisely those regulated or “unfree” elements of Scottish banking which the author of The Wealth of Nations promoted.  Further, I argue that this conclusion should hardly be cause for surprise once we realize that it was none other than the oldest, largest, and most established banks in Scotland that had lobbied for Smith’s legal restrictions on banking; regulations that had the effects of raising barriers to entry, lowering competition in the provision of short-term credit, increasing the efficient scale of banking, and therefore, ultimately, amplifying the level of systematic risk in Scottish credit markets.

Finally, in support of Selgin and White, among others, I find that the relative competitiveness of the Scottish financial system — certainly in contrast to the highly bifurcated English banking sector of the time — along with the unlimited legal liability of shareholders in Scottish private banks, were sources of considerable financial stability, both in 1772 and previously.

Here is the book’s home page.

China law of the day

by  Tyler Cowen in

The government of Shanghai says that under new rules residents who fail to visit their elderly parents will get black marks on their credit records.

A new set of regulations released recently by the government of the eastern city says that adult children living apart from their parents should “visit or send greetings often.” Parents who think their children are not fulfilling this responsibility can file lawsuits against them for neglect.

If the offspring still refuse to follow through with their obligations after a court tells them to, they will have their credit standing negatively impacted, Luo Peixin, deputy director of the city government’s law office, said on a news conference on April 6.

The policy, which takes effect on May 1, is part of the central government’s efforts to promote filial piety, an important aspect of Confucianism, as the country’s population rapidly ages.

Beijing enacted a law in July 2013 aimed at compelling the children of parents older than 60 to visit their parents “frequently” and make sure their financial and emotional needs are met.

Here is the story, and for the pointer I thank Jesse Reynolds, as well as a source on Twitter.

Wednesday assorted links

by  Tyler Cowen

1. Neerav Kingsland on Roland Fryer’s RCT policy proposals for education.

2. Did public mechanical clocks boost economic growth in early modern Europe? (pdf)

3. What are the keys to an effective apology?  Article here.

4. A RAND study which is skeptical about the safety of autonomous vehicles.

5. Chinese hospital and doctor ticket scalpers.

6. Do institutional investors lead to sector-wide collusion? (NYT)

The welfare benefits of global migration

by  Tyler Cowen in

Don’t forget market size!  Via the excellent Kevin Lewis, there is a new paper on this topic, by Amandine Aubry, Michal Burzynski, and Frédéric Docquier.  Here is the abstract:

This paper quantifies the effect of global migration on the welfare of non-migrant OECD citizens. We develop an integrated, multi-country model that accounts for the interactions between the labor market, fiscal, and market size effects of migration, as well as for trade relations between countries. The model is calibrated to match the economic and demographic characteristics of the 34 OECD countries and the rest of the world, as well as trade flows between them in the year 2010. We show that recent migration flows have been beneficial for 69 percent of the non-migrant OECD population, and for 83 percent of non-migrant citizens of the 22 richest OECD countries. Winners are mainly residing in traditional immigration countries; their gains are substantial and are essentially due to the entry of immigrants from non OECD countries. Although labor market and fiscal effects are non-negligible in some countries, the greatest source of gain comes from the market size effect, i.e. the change in the variety of goods available to consumers.

New Zealand, are you listening?

Nigerian economic growth is slowing down

by  Tyler Cowen in

…the World Bank said Nigeria’s economic growth slid to 2.8% in 2015 from 6.3% the year before, and the International Monetary Fund says this year’s growth will slip to 2.3%, slower than the population, which adds 13,000 people daily.

Factories are closing because they can’t find dollars to import parts. Supermarkets are struggling to keep shelves stocked. Power plants have virtually stopped producing electricity because they can’t pay for maintenance. New shopping malls are empty and ordinary citizens are going to lengths to find some basic goods.

…on the streets, daily frustrations are mounting. Electricity is so scarce that the country’s national power plants didn’t produce a single watt for several days last week—they couldn’t import parts and services, said two senior members of Mr. Buhari’s administration. Internet providers face similar woes.

Nigerians abroad are stuck with ATM cards they can’t use because the central bank has limited withdrawals outside the country. Bitcoin trades are up as Nigerian professionals scrounge for ways to move money—and increasingly, themselves—out of the country.

Here is the Drew Hinshaw and Joe Parkinson WSJ story.

For $10 billion, is iPhone space travel a bargain?

by  Tyler Cowen in

Here is the NYT article:

Can you fly an iPhone to the stars?

In an attempt to leapfrog the planets and vault into the interstellar age, a bevy of scientists and other luminaries from Silicon Valley and beyond, led by Yuri Milner, the Russian philanthropist and Internet entrepreneur, announced a plan on Tuesday to send a fleet of robots no bigger than iPhones to Alpha Centauri, the nearest star system, 4.37 light-years away.

If it all worked out — a cosmically big “if” that would occur decades and perhaps $10 billion from now — a rocket would deliver a “mother ship” carrying a thousand or so small probes to space. Once in orbit, the probes would unfold thin sails and then, propelled by powerful laser beams from Earth, set off one by one like a flock of migrating butterflies across the universe.

Within two minutes, the probes would be more than 600,000 miles from home — as far as the lasers can maintain a tight beam — and moving at a fifth of the speed of light. But it would still take 20 years for them to get to Alpha Centauri. Those that survived would zip past the stars, making measurements and beaming pictures back to Earth.

Upon reflection, I don’t think we should do it.  What if the devices are traced back to us and we are exterminated or enslaved or simply demoralized?  Let’s stick with those moons of Saturn.