Results for “concentration” 203 found
The future of Ontario (Canada?)
Daniel Drache reports on some trends which I had not quite been following:
Ontario has the densest concentration of car production probably in the world…
From a North American perspective, Ontario, Canada’s industrial heartland, ranks 16 out of 18 on his competitiveness ranking index, just ahead of Michigan.
…the job boom in resources including minerals and agricultural exports offset less than one-fifth of the jobs lost in Canadian manufacturing facilities. The big winners in terms of job growth are private services and government…
…the incredible growth in services challenges one of the standard assumptions of globalization — that Canada is becoming more integrated into the global economy. Most service production is consumed domestically and virtually all public services are not traded…the most remarkable structural change in the Canadian economy is that Canada was less integrated in world markets at the end of 2006 than it was a decade earlier measured by intense export openness…Canadian exports reached their peak at over 45 percent of the share of Canada’s total GDP in 2000; by 2007 this had declined by 10 points to 35 percent.
Here is yesterday’s related post on America. Here is my earlier post on Harold Innis.
Not From the Onion
The headline says it all:
House keeps farm subsidies, cuts food aid
Here are some of the other provisions which seem designed just to be ridiculed by Jon Stewart:
Directs the Agriculture Department to rewrite rules it issued in January meant to make school meals healthier. Republicans say the new rules, the first major overhaul of school lunches in 15 years, are too costly.
Forces USDA to report to Congress every time officials travel to promote the department’s “Know Your Farmer, Know Your Food” program, which supports locally grown food, and discourages the department from giving research grants to support local food systems. Large agribusiness has been critical of the department’s focus on these smaller food producers.
Prevents USDA from moving forward with new rules that would make it easier for smaller farmers and ranchers to sue large livestock companies on antitrust grounds. The proposed rules are meant to address the growing concentration of corporate power in agriculture.
Delays for more than a year new rules for reporting trades in derivatives, the complex financial instruments blamed for helping precipitate the 2008 financial crisis. A Republican amendment adopted Thursday would require the Commodity Futures Trading Commission, which funded in the bill, to first have other rules in place to facilitate its collection of derivatives market data.
Prevents the FDA from approving genetically modified salmon for human consumption, a decision set for later this year.
Questions the scope of Obama administration initiatives to put calories on menus and limit the marketing of unhealthy foods to children.
Don’t get me wrong, I’d probably do away with a number of these rules as well. But anyone who argues against making school meals healthier because it’s too expensive at the same time as they vote for keeping billions of dollars in farm subsidies is not concerned about expenses. What unites the bill is not ideology but protection of agribusiness.
Perhaps the most outrageous provision was one the good guys won:
Critics of farm subsidies did score one victory: The House voted to block a $147 million annual payment to Brazil’s cotton industry. The United States agreed to make that payment last year after Brazil’s industry complained to the World Trade Organization that Washington unfairly was subsidizing U.S. cotton farmers. The United States lost the WTO case and agreed to make the payments to Brazil as a settlement.
So not only have we been subsidizing cotton farmers but we have been paying Brazil to allow us to keep subsidizing cotton farmers. Incredible. I wonder whether this provision will make it into the final bill.
When does greater inequality lead to greater redistribution?
Henry Farrell reports:
Noam Lupu and Jonas Pontussen (PDF) have a piece on the relationship between inequality and distribution in the new American Political Science Review. There is a lot of debate about whether the level of economic inequality in society leads to greater or lesser distribution – what Lupu and Pontussen suggest is that the structure of inequality (that is – the more particular relationships between different segments in the income distribution, rather than some summary index) is more important. More particularly they argue that if one tries to hold racial and ethnic cleavages constant, the key factor determining redistribution is the income gap between middle income voters and lower income voters. Where this gap is low, middle class people feel some degree of solidarity with the poor and exhibit what Lupu and Pontussen describe as “parochial altruism.” That is, they are more likely to support income redistribution because they feel that the poor are in some sense, ‘like them.’ When the gap is high, middle class people will have a much weaker sense of solidarity with the poor, and hence be less supportive of redistribution. Lupu and Pontussen suggest that the US is an outlier, with weaker solidarity than the structure of US inequality would suggest. They argue that the explanation for this is straightforward – “it is clearly attributable to the high-concentration of racial-ethnic minorities in the bottom of the income distribution.” More bluntly put – middle class Americans feel less solidarity with the very poor because the very poor are more likely to be black.
Where does Japan put its nuclear reactors?
Chris Blattman reports on the work of Daniel Aldrich, quoting Aldrich:
Using a new dataset from Japan, this paper demonstrates that state agencies choose localities judged weakest in local civil society as host communities for controversial projects. In some cases, powerful politicians deliberately seek to have facilities such as nuclear power plants, dams, and airports placed in their home constituency. This paper then explores new territory: how demographic, political, and civil society factors impact the outcomes of siting attempts. It finds that the strength of local civil society impacts the probability that a proposed project will come to fruition; the greater the concentration of local civil society, the less likely state-planned projects will be completed.
What I’ve been reading
1. The Half-Made World, by Felix Gilman. I very much enjoyed this mix of dystopian steampunk and speculative science fiction, reviewed by Henry here.
2. Vassily Grossman, Everything Flows. I found this more fluent and compelling than his longer Life and Fate; it's the story of a man who returns home from a concentration camp. Recommended.
3. Richard Overy, 1939: Countdown to War. I didn't think a book so short on this topic could be good. I was wrong. Overy has a strong overall track record as an author.
4. Samuel Moyn, The Last Utopia: Human Rights in History. I don't have any objections to this much-touted book, but I expected to learn more from it than I did. It didn't feel like 352 pp.
5. Nicholas Ostler, The Last Lingua Franca: English Until the Return of Babel. A provocative book on the forthcoming decline of English as a globally dominant language. I'm not (yet?) convinced, but I'm less unconvinced than I thought I would be. One main point is that more and more business will be done without English at all, often through the BRICS countries. It is interesting to see that fewer people in South Africa are learning English.
Writing naked puts and how the financial sector makes so much money
In part the financial sector does the equivalent of writing "naked puts," namely taking risks which usually yield extra income but occasionally blow up and bring large losses, part of which are socialized. Lending money to homeowners under relatively loose terms is one way of taking such a position but of course trading strategies can replicate related risk positions.
H. Peyton Young just wrote me that he and Dean Foster have a piece in the latest QJE on a closely related logic; I have yet to read it closely but it strikes me as a very very important article.
The key problem underlying all of this is we don't know how to punish people in a manner consistent with the rising size of absolute rewards. As I wrote:
Another root cause of growing inequality is that the modern world, by so limiting our downside risk, makes extreme risk-taking all too comfortable and easy. More risk-taking will mean more inequality, sooner or later, because winners always emerge from risk-taking. Yet bankers who take bad risks (provided those risks are legal) simply do not end up with bad outcomes in any absolute sense. They still have millions in the bank, lots of human capital and plenty of social status. We’re not going to bring back torture, trial by ordeal or debtors’ prisons, nor should we. Yet the threat of impoverishment and disgrace no longer looms the way it once did, so we no longer can constrain excess financial risk-taking. It’s too soft and cushy a world.
That’s an underappreciated way to think about our modern, wealthy economy: Smart people have greater reach than ever before, and nothing really can go so wrong for them. As a broad-based portrait of the new world, that sounds pretty good, and usually it is. Just keep in mind that every now and then those smart people will be making—collectively—some pretty big mistakes.
Matt is correct that the argument doesn't require bailouts, although bailouts make the problem much worse, by neutering creditors as a risk-reducing force.
Most likely, shareholders favor some but not all of these "going short on volatility" risks. To some extent they are ripping off the creditors by taking such risks, to some extent they are ripping off the public sector through an expected bailout (not true for most non-financial firms, of course), and to some extent the managers are pushing the risk beyond the point shareholders would desire, if they understood what was going on. Keep in mind that shareholders and bondholders are also potential market competitors, so the firm's trading book can't be completely open to even the owners of the firm (a neglected point, in my view).
One question, raised by Robin Hanson, is why everyone doesn't write these naked puts. You can introduce the "not everyone can expect a bailout" point here and it works fine. But there are other reasons too:
1. Large-scale banking involves economies of scale (after the few biggest U.S. banks, size drops off dramatically). You don't have to think these economies are socially productive; the point remains that Goldman can take positions which my local bank will not or cannot with equal facility, for a mix of institutional and expertise reasons. The prospect of bailouts, of course, cements concentration in the sector because everyone wants to lend to "Too Big to Fail."
2. Arguably every bank does write the equivalent of naked puts to a socially non-optimal degree. It is often homeowners on the other side of the market, arguably to an irrational degree. In any case the resulting price of the put can be actuarially fair and the basic mechanism still operates. If you play this strategy, you can expect (the mode) a bunch of years of multi-million returns, followed by an eventual unceremonious firing (if that) and life in the Hamptons. If you follow an efficient markets strategy, you can expect the going rate of return on the diversified market portoflio. Which sounds better?
Soon I'll write a post on whether vigilant creditors can neuter this risk-taking, so please hold off on that question for now.
Addendum: This "going short on volatility" risk strategy is receiving a good deal of attention from commentators on my piece, but I actually think "arriving there first with a good asset purchase," as I discuss in the article, is a somewhat more important mechanism for increasing income inequality among the top one percent. A lot of the rise in income inequality has come outside the financial sector narrowly construed, though it still is related to the existence of relatively open capital markets.
Obamacare: where are we?
I became so sick of blogging this topic, but it's time to revisit where matters stand:
1. The health care sector is becoming more concentrated, largely through mergers and acquisitions. Some of this is long-term trend, and some of it is a direct response to a more regulated and rent-seeking-intensive sector. By no means I am against corporate bigness per se, but this does not augur well for cost control and affordability.
2. It seems more obvious that requiring health insurance companies to limit their overhead costs is a mistake. It is leading to more concentration in the sector and probably to more accounting chicanery as well.
3. Contrary to my earlier expectations, the legal issues are not going away. They had seemed like non-starters to me, but I now could imagine that a few Federal judges rule against the mandate and there is a subsequent crisis of confidence as some major Democrats run for cover rather than defending the policy. I now give this scenario 35-65 rather than 10-90. The fact that mandate enforcement could be passed to the state level, without much affecting the operation of the plan, doesn't matter any more, given the spin such rulings of unconstitutionality would receive.
4. Negative trends in health care markets continue, and many of these will be blamed, by many people, on the new health care reform. In fact Obamacare will make some of these trends worse (e.g., private insurance patients pushing out Medicaid patients), but Obamacare will be blamed for this problem before the extra negative effect starts operating. I understand the political logic of how benefits programs became popular and then become locked into place, but I'm seeing more clearly now that the health care reform simply isn't well timed to be very popular.
5. The differential payment rates across Medicare, Medicaid, and private insurance are becoming unsustainable more quickly than I had anticipated; see for instance the link in #4. Further reforms will be required more quickly than had been anticipated, but it's not obvious how such reforms should proceed. It's hard to either upgrade the Medicaid (and Medicare) rates or to downgrade the private insurance rates. Monitor this one closely, because it is likely to prove the breaking point of our health care status quo, with or without the Obama plan. (This is our version of the ticking time bomb within the eurozone, namely that natural rates of growth split apart a distortion, increasingly, over time.)
6. I am less worried about mandate enforcement than I used to be; Austin Frakt has had good posts on this at TheIncidentalEconomist, see here.
7. I am more worried about employers shedding employees onto the subsidized exchanges than I used to be; Reihan Salam has had good posts on this topic and how it could prove to be a fiscal breaking point for the new law. You can argue that this is the actual long-run restructuring plan, but unless we are willing to go the "Medicaid for all reimbursement rates" route, I don't see how we afford it.
8. I have the new worry of uncooperative state governors trying to shed their Medicaid loads onto the federally-subsidized health insurance exchanges. Could one or two rogue states on this issue create a crisis in the system? I find this one hard to judge, both politically and logistically, but six months ago I wasn't thinking about it at all.
9. The Republicans still don't have a good alternative plan or compromise to offer, should a chance for renegotiation arise.
Overall, the policy is shaping up to be a mess more quickly than I had thought, though not through the mechanisms I had been expecting. It still seems to have too many jerry-rigged pressure points.
I'm all for a compromise allowing greater state-level experimentation with health care policy.
Richard Florida’s index of the least bohemian cities
He measures Los Angeles as the most bohemian city in North America and the five least bohemian are the following:
1. Riverside
2. Hartford
3. New Orleans
4. Memphis
5. Birmingham
The lists continue at the link, along with a very interesting discussion. I'll accede to some version of this more-scientific-than-my-intuition list, while noting that my picks were different in part because I restricted my attention to much larger population centers. Florida also remarks that Stockholm measures as quite bohemian, while I wish to note I'm familiar with the Goth culture of Santiago, Chile but not so impressed by it as true bohemianism.
Addendum: Here's the start of Florida's definition: "The index charts the concentration of working artists, musicians, writers, designers, and entertainers across metropolitan areas." I had something in mind more about the "feeling of the place," so I see L.A.'s "Downtown" as quite bohemian in spots but the city as less bohemian overall than Florida's index will indicate.
Assorted links
1. The evolution of income distribution in Canada.
2. How can we tell if financial reform is working?
3. Vending machines in everything.
4. Correction on Leibniz, see also Jacob T. Levy, a great post but I can only wonder what he was at this point expecting, the show hasn't made sense from episode one.
5. Will fiscal austerity sweep Europe (and does anyone now hold the view that these countries need more government spending)?
Predators and multiple marginalization
Abraham Rosenwald likewise encountered a bewildering array of different groups in the forest after he escaped from Tartak [a concentration camp in Poland]. First, he encountered Bolek, who would not take his group of Jews since they had no weapons. A second partisan group robbed them of their few possessions. To live, "we went to the fields and gathered potatoes. The peasants ambushed us and beat us up." A third group of partisans murdered one of Abraham's companions, Israel Rosenberg, because they coveted his clothes. In one village they encountered a fourth group of partisans, whose commander would not let them join but nonetheless gave them some grenades for self-defense. Members of a fifth group of partisans robbed them once again, but this time the commander returned the stolen goods. A sixth partisan group agreed to take any Jews with prior military experience but subsequently murdered them. Abraham was finally allowed to joint a seventh group, from whom he received rifle training, but he became separated in escaping a German encirclement. An eighth group, led by "Piotor," allowed Jews to join but only to perform menial work, not fight. And the Jews were not allowed to stay with Piotor when he crossed over to the Russian lines. At this point, Abraham encountered Shlomo Einesman, who had left his hiding place. Einesman suggested the others return to that hiding place with him, since he had sufficient money. Instead, Abraham persisted in going east and this time made it across to the Soviets.
That is from Christopher R. Browning's new book Remembering Survival: Inside a Nazi Slave-Labor Camp.
Daniel Gross, Me, and the Efficient Market Hypothesis
Daniel Gross is at Davos and writes:
I noticed a piece of gray paper on the floor. It looked like it might
be currency of some sort–certainly not a dollar, but perhaps Swiss
francs or something else. I started to bend over to pick it up, but
then I caught myself. This is the World Economic Forum. It is populated
by hundreds of economists and by thousands of business people schooled
in the tenets of economics. This is possibly the most rational,
profit-maximizing concentration of human capital in the world. These
are the actors who make up an efficient market. And of course adherents
to the efficient market hypothesis famously don't believe in the
concept of found money….
But I'm a
connoisseur of economic irrationality. And so I bent down and picked up
the paper. On one side, the grim visage of Queen Elizabeth. On the
other, Charles Darwin. It was a 10 pound note, worth about $16.25. Just
lying on the floor, unmolested by Nobel Prize-winning economists, CEOs
of Fortune 500 companies, and financial journalists.
Gross concludes the efficient markets hypothesis must be false.
The same thing happened to me once except I wasn't at Davos, I was walking in New York near Wall Street and I saw a green folded up note that looked to be money. I too paused and thought of the old joke that if it was money someone would have picked it up already, but I picked it up anyway and took a closer look…..alas, it was a cleverly folded piece of paper designed to look like money when dropped on the sidewalk, although it was actually an advertisement. Kudos to Eugene Fama, I thought on that day.
Perhaps our different experiences account for some of our differing economics views.
Hat tip to Ezra Klein.
Moving essay by Tony Judt on ALS
During the day I can at least request a scratch, an adjustment, a drink, or simply a gratuitous re-placement of my limbs–since enforced stillness for hours on end is not only physically uncomfortable but psychologically close to intolerable. It is not as though you lose the desire to stretch, to bend, to stand or lie or run or even exercise. But when the urge comes over you there is nothing–nothing–that you can do except seek some tiny substitute or else find a way to suppress the thought and the accompanying muscle memory.
But then comes the night. I leave bedtime until the last possible moment compatible with my nurse's need for sleep. Once I have been "prepared" for bed I am rolled into the bedroom in the wheelchair where I have spent the past eighteen hours. With some difficulty (despite my reduced height, mass, and bulk I am still a substantial dead weight for even a strong man to shift) I am maneuvered onto my cot. I am sat upright at an angle of some 110° and wedged into place with folded towels and pillows, my left leg in particular turned out ballet-like to compensate for its propensity to collapse inward. This process requires considerable concentration. If I allow a stray limb to be mis-placed, or fail to insist on having my midriff carefully aligned with legs and head, I shall suffer the agonies of the damned later in the night.
Read the whole thing. I thank The Browser for the pointer. Here is previous MR coverage of Tony Judt, an excellent thinker and writer.
Why are Swedish meatballs so much smaller than their American counterparts?
This topic has been knocking around the blogosphere as of late:
I am a longtime reader of MR and there is a question I have been wondering about for a long time. I was hoping you could share your thoughts on meatball heterogeneity. My girlfriend made dinner for me and the entree was Swedish meatballs. I never knew how small their meatballs are. It seems inefficient to roll all that meat into such tiny balls. Wouldn’t it make more sense to roll them into big balls like we do in the US?
First, history + hysteresis play a role. According to Mathistorisk Uppslagsbok by Jan-Ojvind Swahn, the Swedish concept of meatball first appeared in Cajsa Warg's 1754 cookbook. Yet as late as the early 20th century, beef was still a luxury in Swedish culture, whereas meat was plentiful in the United States. America had greater access to game in the more moderate climate and also greater grass resources for supporting cows. The Swedes were also late in benefiting from the refrigerated transport revolution, which started elsewhere in the 1920s and brought more meat to many households. (This tardiness was due to the concentration of population in a small number of cities, combined with rail isolation from Europe.) The end result was smaller meatballs, a tradition which has persisted to this day.
On the plane of pure theory, standing behind the lock-in effect is the Ricardian (or should I say Solowian? Solow is the modern Ricardian when you think through the underlying asymmetries in his model, which ultimately make "capital" non-productive at some margin) fixed factor explanation. A Swedish meatball recipe usually involves much more dairy than a non-Swedish meatball recipe. Constant returns to scale do not in general hold for recipes, much less for loosely packed spherical items involving fluids.
Oddly, the extant literature does not seem to have considered these factors.
From the comments: Lennart writes: "Swedish meatballs, having loads of surface that are fried crispy, are much better than other forms of meatballs for that reason alone. Norwegians and Danish have big meatballs, but that's because they are boiled, so there is no crispy-fried surface to maximize (and hence nowhere near as good)."
Pedigree bias in economics
Coastal Elite, a loyal MR requester, requests:
Why is there more "pedigree bias" for hiring of Economics faculty than
in other disciplines? For example, at any top 30 school, 95% of the
faculty will have their PhD from a top 10 school. In other fields, this
will not be the case. Some other disciplines have a much stronger
tendency to co-author than Economics, which should decrease the signal
to noise ratio on a CV. This should imply that pedigree bias should be
even stronger in disciplines with more co-authoring, but anecdotally
this does not seem to be true.
And very often it is the top six rather than the top ten. I don't myself see the factor of co-authoring as the path to an answer here. The default answer is to invoke a relatively high importance for IQ, in economics, combined with the relative absence of prodigies, compared to say math. When prodigies and autodidacts are possible, top performers can come from anywhere. But smarts and training and networking are all required. The combination of those barriers give a big advantage, justified or not, to the very top schools. It is usually believed that a candidate from a lesser school is lacking in at least one of these yet all are required for a big career success. So maybe a "multiplicative model" of achievement in economics plays a big role in pedigree bias.
On top of that, economics is a relatively unified field with relatively homogeneous metrics of quality. A school ranked #23 can "play it safe" by hiring a lesser MIT grad, rather than the best student coming out of Emory, and more or less know what they are getting and agree on that. This tendency in the market is probably inefficient, relative to a first-best with a higher degree of intellectual innovation and less concentration of rewards across the top graduate programs.
Also, the top programs are good at doing admissions — surprisingly good in my view — and pre-selecting the kind of talent the rest of the profession is looking for.
Which other fields have a comparable "pedigree bias"?
Why do universities grant honorary doctorates?
A longstanding MR reader writes to me:
My father will be granted
an honorary doctorate from a European university. While he is
undoubtedly deserving of the honor (he is a well-known professor in his
field), I don't understand the European institution's incentives in
granting the doctorate. My father in not from Europe, holds no degrees
from there, has never worked there, and is unlikely to attract others
to go there. Outside of altruism, why is he being honored? More
broadly, why would any university grant an honorary degree, especially
relatively high-status universities of the Stanford/MIT/Oxbridge ilk?
Especially when conferred to non-academics, don't such degrees dilute
the brand value of the university?
I can think of a few reasons for honorary doctorates:
1. The recipient is a major donor or potential major donor or friend of major donors.
2. The awarding of the doctorate creates press releases and attracts attention for the university. If the recipient is sufficiently prestigious, this involves no reputational cost for the granting institution and perhaps it creates slight reputational benefits. The university also has some chance to make a favorable impression on famous people.
3. Awarding the degree signals the strength of interest groups within the university. Some universities have squabbled over whether President Obama should be given an honorary degree. Last year St. Ambrose, a Catholic school in Iowa, awarded an honorary degree to a "pro-abortion activist," as it was described. In 1985 Oxford broke precedent and refused to award Margaret Thatcher an honorary degree, as the school had done with previous Prime Ministers. They were upset that she had cut funding for British universities.
4. An honorary degree may spur student interest in the school and in the graduation ceremonies, such as when Knox College awarded Stephen Colbert an honorary degree in 2006. Keep in mind that current students are often future donors, so you want to give them a ceremony to remember.
5. Honorary degrees are often a lure to attract commencement speakers.
Cambridge University has given honorary degrees to Albert Einstein, Nelson Mandela, Bill Gates, and now its roadsweeper. I guess they don't want to seem intellectually elitist. Yale gave Paul McCartney an honorary degree.
The UC system gave 700 honorary degrees to former Japanese-American students, namely the ones who were placed in concentration camps during WWII. They thought this was the right thing to do and it may have garnered them points with some local Asian communities.
The question in my mind is the opposite of the reader's: why does anyone accept honorary degrees? Maybe it's hard to say no. David Schindler, a leading environmental scientist, has the right idea:
…there is a saturation limit. I've started to turn down about half of
the honorary degree invitations. I feel badly about it, but each one
takes at least three days, including travel, and I am starting to feel
anxious about the few years I have left to accomplish things that I
want to do.
The practice of honorary degrees dates back to medieval times. The Archbishop of Canterbury has the power to award (non-honorary) degrees, in what I am not sure.
Al Lewis, who played Grampa Munster, claimed to have a Ph.d. in child psychology but it seems this was neither honorary nor real.
