Sentences about China
1. There is no rebalancing. 2. Services only growing from increased new loan volume and real estate revenue growth.
Those are from Christopher Balding, here is his full blog post, and also more here.
The economics of the Bronx
One reason the projects planned for the edge of the South Bronx aren’t likely to spread inland, gentrifying as they go, is that the area has the highest density of public housing in the nation. The Bronx has 44,000 such units, while Brooklyn, with nearly twice the population, has 58,000. “It’s harder for high-end gentrification to happen anyplace where the density of public housing is high,” says Gecan, who headed a project that built some of the first affordable housing in the post-1970s Bronx. “They just don’t go together.”
There is this too:
“Public housing is in a state of catastrophic decline,” Torres says, “due to a perfect storm of disinvestment. In 1998, the state cut off all operating subsidies; the city did the same in 2003. If a private landlord cut off funding for the operation and maintenance of his building, there would be legal consequences.” Federal funding has been greatly reduced as well. “The New York City Housing Authority [the city’s public housing agency] has capital needs of $17 billion to bring all its housing stock into good repair over the developments’ life expectancy. It gets $300 million a year from Washington.”
Those are from Harold Meyerson’s very good piece on the Bronx.
Not exactly the fiscal theory of the price level
Zambia will hold a day of prayer and fasting on Sunday, with bars shut and football matches cancelled, to seek divine help over the country’s currency collapse and dire economic woes.
President Edgar Lungu last month ordered the national prayer session after the kwacha fell 45 percent against the dollar since the start of the year due to a sharp drop in the price of copper, the country’s main export.
Food prices have soared and crippling power shortages have also been triggered by low water-levels in Lake Kariba, where hydropower plants supply much of the country’s electricity.
“God is a god of miracles and if we ask him, he will bless us and the kwacha shall be restored to its former strength and the prices of goods shall again go down,” Bishop Simon Chihana, president of the International Fellowship of Christian Churches in Zambia, told AFP.
“Let’s pray to God to have mercy on us. God has done that before and he can do it again.”
There is more here, via Peter Metrinko.
Payday Lending
Here is the opening to a delightfully combative post on payday lending at Liberty Street Economics, the blog of New York Fed:
Except for the ten to twelve million people who use them every year, just about everybody hates payday loans. Their detractors include many law professors, consumer advocates, members of the clergy, journalists, policymakers, and even the President! But is all the enmity justified? We show that many elements of the payday lending critique—their “unconscionable” and “spiraling” fees and their “targeting” of minorities—don’t hold up under scrutiny and the weight of evidence. After dispensing with those wrong reasons to object to payday lenders, we focus on a possible right reason: the tendency for some borrowers to roll over loans repeatedly. The key question here is whether the borrowers prone to rollovers are systematically overoptimistic about how quickly they will repay their loan. After reviewing the limited and mixed evidence on that point, we conclude that more research on the causes and consequences of rollovers should come before any wholesale reforms of payday credit.
Read the whole thing.
Monday assorted links
1. Was David Ricardo the richest economist in history? (pdf)
2. More evidence on the growing importance of social skills in the workplace.
3. Demographics will work against state and local government employment.
4. What makes Denmark tick? And are the Democrats in trouble?
5. There is no great curling stagnation but maybe there should be.
6. “Police “disappeared” more than 7,000 people at an off-the-books interrogation warehouse in Chicago, nearly twice as many detentions as previously disclosed, the Guardian can now reveal.” Link here, yikes throughout.
7. Review of Roger Lowenstein’s new book America’s Bank, on the origins of the Fed.
The President who owns foreign capital
Shortly after his election, President Peake announced that although he was creating a semi-blind trust, he would not be liquidating his capital holdings abroad. (Read more here.) Yet for years Peake had been seeking to expand his commercial operations in the enemy nation of Ruritania, by some measures soon to be the world’s largest economy.
Observers questioned whether Peake could deal fairly and objectively with Ruritania in matters of foreign policy, including the all-consuming conflicts in the South Ruritania Sea. But of course Peake was a wealthy man and also an honest man. Furthermore each action of his was under extreme public and media scrutiny, most of all when he dealt with Ruritania. Some even suggested that the mere possibility of conflicts of interest made Peake tougher on Ruritania than another President would have been.
To make sure no rumors of favor-trading would ensue, thereby weakening Peake’s American influence, Ruritania moved to give Peake’s commercial operations free rein, thus removing the issue from the daily headlines. Peake, now having avoided the risk of blame, returned to the policy optimum and ceased being so unnecessarily tough with Ruritania.
I hope there will be more installments to this story.
The neuroscience of corporations
In research published last year in the journal Social Neuroscience, Mark Plitt at Baylor College of Medicine and colleagues presented some of their 40 subjects with vignettes of actions taken by humans or corporations that were either prosocial (e.g., donating money), neutral (e.g., buying a printer) or antisocial (e.g., breaking the law). As a control, the other subjects got Wikipedia descriptions of randomly chosen nouns. What were people’s responses to human and corporate actions?
There was a small negative skew about corporations—their prosocial acts elicited less positive emotions, and their neutral or antisocial acts elicited more negative emotions than did the equivalents by humans.
There is more from the WSJ here, via Samir Varma. By the way, file under “speculative.”
Thomas Merrill on David Hume’s coalition
American University professor Thomas Merrill writes:
Hume’s message to the “honest gentlemen” is therefore something like this: “you may not understand this curious character the philosopher; you may think him flaky and unhinged; but if you care about establishing a regime dedicated to individual liberty, you need him around. You need not model your life on his; in fact it is better if you do not. But you need to tolerate him and even be open to being guided by him. Especially do you need to heed his negative message of calling into question the political claims advanced by the various forms of superstition on the basis of alleged insights into the ‘original and ultimate principle.’ Think of the philosopher as you might a garbage man: you might not want to do the job yourself, but it is very useful to society that someone does it.”
That is from Merrill’s Hume and the Politics of Enlightenment, and the passage was sent to me by Daniel Klein, who describes the book as “new and highly recommended.”
Sunday assorted links
Dani Rodrik and the Sledgehammer coup plot
There is a lengthy and interesting Chronicle profile by Marc Parry. It tells the tale of how Rodrik vindicated his father-in-law, a famous general, from false charges of having led a potential coup d’etat against the Turkish government. Here is one excerpt:
When Rodrik and his wife spoke with Cetin Dogan, though, the general told them he’d never heard of Sledgehammer. They believed him. But that only deepened the mystery. Were the coup plans genuine? Had Dogan’s name somehow been added to them? Rodrik and Pinar Dogan began to investigate the coup documents, which eventually became the centerpiece of a landmark court case that targeted hundreds of military officers. Many called it Turkey’s “trial of the century.” The two economists called it a fraud.
As a social scientist, Rodrik had always believed in the power of evidence to change people’s minds. His Sledgehammer investigation revealed the coup plans to be forgeries. The evidence was clearer than anything he had ever encountered in economics. But it didn’t matter. People clung to the story regardless.
Rodrik has written his own essay on the Sledgehammer episode (pdf). Basically he and his wife ended up playing detective for several years of their lives, and eventually Rodrik’s father-in-law was freed from prison. Here is a bit toward the end of the piece:
“It’s very easy to read these stories, and they resonate with your own worldview as a liberal,” Rodrik says. “And you’re likely to believe it. I wouldn’t say that it turned me into a conservative. But it made me much more skeptical and much more cautious about what one might say is the standard Northeastern-Ivy League-elite-liberal-establishment narrative about how the world works.”
My recent conversation with Dani Rodrik has both transcript and video.
What I’ve been reading
1. Andrea Wulf, The Invention of Nature: Alexander von Humboldt’s New World. Haven’t I read too many recent books about him already? Well, this is the best one and will make my “best of the year” list. Now if we could only have a renaissance of interest in his brother, Wilhelm von Humboldt…
2. James Shapiro, The Year of Lear: Shakespeare in 1606. What was the political and social setting in which Lear was composed? Recommended, substantive throughout with hardly a wasted page.
3. Pallavi Aiyar, New Old World: An Indian Journalist Discovers the Changing Face of Europe. I’ve been waiting for a book like this to be written, and now it exists. It’s fun, and full of good humor.
4. Eka Kurniawan, Beauty is a Wound. It’s been called the Garcia Marquez of Indonesia, and it is one of the country’s classic novels, newly translated into English. Here is a good NYT review.
*The Gunpowder Age*
The author is Tonio Andrade, and the subtitle is China, Military Innovation, and the Rise of the West in World History. This is an excellent book, full of history, science, and political economy, think of it as a parallel history of the evolution of guns across China and Europe, with an eye toward explaining larger state structures. Some of the things I learned or learned in a new way were:
1. The “competing states” argument for the rise of Europe is in some ways overvalued, as it neglects some critical time periods of competition across states in Chinese history.
2. Walls and guns co-evolved, in both China and Europe. And in earlier times, China had much bigger and stronger walls. That may have lowered the rate of return on investing in guns.
3. By 1510 or 1520, European guns already were better than Chinese guns. But through the following centuries, the Chinese were more aware of the need to catch up than is often realized.
4. Guns and gunpowder co-evolved, and when it comes to gunpowder some historians argue Europe had a second-mover advantage. Yet the exact source of European superiority in this regard is murky.
5. Korea developed one of the most effective musket-based armies of the seventeenth century.
6. The British development of “cylinder powder” in the late eighteenth century was a major advance over Chinese techniques at the time, and represented a final and decisive relative advance for the West.
Recommended, due out in January.
Saturday assorted links
Governments are more likely than businesses to break pollution regulations
I believe I linked to an earlier version of these results a while ago, but the point deserves reiteration:
For the study, Konisky and Teodoro examined records from 2000 to 2011 for power plants and hospitals regulated under the Clean Air Act and from 2010 to 2013 for water utilities regulated under the Safe Drinking Water Act. The study included over 3,000 power plants, over 1,000 hospitals and over 4,200 water utilities — some privately owned and others owned by public agencies.
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For power plants and hospitals, public facilities were on average 9 percent more likely to be out of compliance with Clean Air Act regulations and 20 percent more likely to have committed high-priority violations.
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For water utilities, public facilities had on average 14 percent more Safe Drinking Water Act health violations and were 29 percent more likely to commit monitoring violations.
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Public power plants and hospitals that violated the Clean Air Act were 1 percent less likely than private-sector violators to receive a punitive sanction and 20 percent less likely to be fined.
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Public water utilities that violated Safe Drinking Water Act standards were 3 percent less likely than investor-owned utilities to receive formal enforcement actions.
Konisky said the findings are significant but not surprising. Government entities have higher costs of complying with regulations because they often must go through political processes to raise the money needed to improve their facilities. And they may face pushback from customers or taxpayers who object to higher rates and have the political power to block them.
Public entities also face lower costs for violating the regulations, the authors argue. There is evidence from other studies that they are able to delay or avoid paying fines when penalties are assessed. And officials with regulatory agencies may be sympathetic to violations by public entities, because they understand the difficulty of securing resources in the public sector.
The full Indiana press release is here, and for the pointer I thank Charles Klingman.
Are trade imbalances a problem?
Here is Martin Sandbu of the FT in his new book Europe’s Orphan: The Future of the Euro and the Politics of Debt on that topic:
In an integrated regional economy like Europe’s, it is improbable that every country is able to offer just the right investment opportunities to match the country’s own savings. Countries that want to save more than they invest need to find a productive outlet for their savings. Countries that can productively invest more than they are willing or able to save must find funds from the outside. And so long as the fund that flow across borders are invested well, such flows can benefit lenders and borrowers alike. Indeed, large asymmetries are not only compatible with efficient economic development but they can be vital for making it happen: Norway’s current account deficit reached 14 per cent of GDP in the late 1970s, but the capital is imported enabled it to build up one of the world’s largest oil industries.
I do not agree with all of Sandbu’s extended apologia for the euro, but this is nonetheless a highly intelligent, thought provoking book, to be read by anyone who follows contemporary macroeconomic policy. Another point he makes is that the euro didn’t actually cause so many countries to give up the option of debt monetization, given they would have ended up borrowing in foreign hard currencies in any case.