On the future of Dogecoin, BitCoin, and other cryptocurrencies of the non-realm

by  Tyler Cowen in

An email query from Brad DeLong reminds me of this old Bart Taub paper, “Private Fiat Money with Many Suppliers” (jstor):

A dynamic rational expectations model of money is used to investigate whether a Nash equilibrium of many firms, each supplying its own brand-name currency, will optimally deflate their currencies in Friedman’s (1969) sense. The optimal deflation does arise under an open loop dynamic structure, but the equilibrium breaks down under a more realistic feedback control structure.

There is also Marimon, Nicolini, and Teles (pdf) and the work of Berentsen., all building on Ben Klein’s piece from 1974.  This literature has been read a few different ways, but I take the upshot to be that a) a monopolized private fiat money might be stable in supply, to protect the stream of future quasi-rents, and b) private competing fiat monies will not be stable in overall supply, for reasons of time consistency and also the competitive erosion of available rents.  In other words, when it comes to the proliferation of cryptocurrencies, the more the merrier but not for those holding them.

I don’t agree with the modeling strategy of this 1981 Kareken and Wallace paper on the indeterminacy of equilibrium exchange rates, but still it is another useful starting point.

Addendum: Krugman adds a bit more on Bitcoin, from a friend of his, John R. Levine.  Here is the final bit from Levine:

My current guess is that the Bitcoin bubble will collapse when there is some bad news, e.g., a regulator demands registration of Bitcoin wallets, people try and cash out, and find that that while it’s easy to buy bitcoins, it’s much harder to find people willing to buy back nontrivial amounts, very hard to collect the sales proceeds, and completely impossible without revealing exactly who you are.

*Her*

by  Tyler Cowen in

As I tend to find Jonze’s work contrived I didn’t expect much, but I was bowled over by what is a must-see movie for anyone interested in tech or the social sciences or for that matter cinema.  Two of its starting premises are a) we as humans now face shadow prices which lead us to deemphasize the physical world of things and live in a world of information, and b) if we are going to have AI, which consumes real resources, which Darwinian principles will govern what kinds of personal assistants survive or do not?  Will they enslave us, will they be our dogs, our friends, our trading partners, or something else altogether?  This movie is the single best place to start on that question.

The rest is, as they say, solve for the equilibrium.  I found the dialogue, performances, and cinematography very strong.  The skyline blends Los Angeles and Shanghai.  The movie toys with the viewer in a clever manner as to whether it is about the future, the present, or both.  Several of the scenes (reluctance to spoil prevents further specificity) were some of the best and most creative and most conceptual movie-making I have seen, ever.

The “sources” for this movie, whether Spike Jonze is aware of them all or not, include Cyrano de Bergerac, various Mermaid legends, Blade Runner, Spielberg’s AI, 2001, Lubitsch’s The Shop Around the Corner, Philip Pullman, Bewitched and I Dream of Jeannie, Pinocchio, Girard and indeed Shakespeare on the triangulation and intermediation of desire, Electric Dreams, Battlestar Galactica, Annie Hall, and even the Mormon doctrine of the Holy Ghost, as well as Jonze’s previous movies.  This is perhaps the most accurate review (some spoilers) I have seen.  This too is an insightful review, but the spoilers there are massive.  Best is not to read either but just to go see it.

Definitely recommended, for me this was one of the cultural events of the year.

Carl-Henri Prophète on Haitian economic growth

by  Tyler Cowen in

He writes to me:

…just to let you know that Haiti’s economy grew by 4.3% in 2013. This is the highest growth rate since the 1970s excluding post embargo and post earthquake years (1995 and 2011). Nothing spectacular, but worth noticing I think. Some people may question these numbers in a country where the National Statistics Institute regularly looses its best staff to NGOs where they can earn 3 times their previous salary. But there is a general feel that economic activity was definitely higher than usual in 2013.

This is partly due to luck: There were no hurricanes or major drought period during the year, so agriculture which accounts for around a 1/4 of the economy grew by 4.6%. The construction sector did also well (+9%) thanks to major infrastructure investment by the government funded by generous Venezuelan aid and some major private investments (in the hotel sector for instance). Exports also increased in real terms by 5%. By the way, there are two firms assembling low cost Android tablets in the country now, which may lead to a greater diversification in exports away from garments in the future. (see here http://bit.ly/1lnVVxjand here http://bit.ly/Jkit6v)

However, inequality is still very high and even more spatially visible as the relatively wealthy suburb of Petion Ville is booming and has became the de-facto capital since the earthquake. Also, there are questions about how long this Venezuelan aid will last and its impact on the country’s debt, corruption and government accountability. Furthermore, there should be elections for many parliament seats in 2014 which may fuel political instability.

More on the difference between Airbus and Boeing control systems

by  Tyler Cowen in

An MR reader writes to me:

Chances are you have received an email similar to this from other airline pilots, but in the off case you have not:

The article you posted contains what I believe to be some oversimplifications of the A/B control system philosophy differences.

It’s commonly stated that the Airbus will override the pilot and the Boeing will not.  This isn’t entirely true.

A more accurate statement would be this:  All jet aircraft have override/feedback systems that will warn or resist the pilot at the edges of the aerodynamic envelope.  Airbus has a slightly larger number of these systems, and they are set to trigger slightly earlier.

Both aircraft will automatically throttle back if in an overspeed condition.
Both aircraft will automatically shake the yoke, and then automatically push over, in a stall condition.

etc.

Airbus, in addition, will limit max G forces on the aircraft.  Boeing does not.

The advantage of the Airbus approach is that you can haul back on the stick as hard as you want without breaking the aircraft (and turning it into several smaller, less-airworthy aircraft).  You are limited to G forces that produce no damage to the aircraft.

The advantage of the Boeing approach is that you can generate any g forces you want.  This gives you the opportunity to fly in the region that generates enough G to bend the aircraft, but not to break it.  That extra G force may help you avoid a mountain.  Of course, you may extend into the part of the envelope that breaks the aircraft.

These differences are relatively minor, as the vast majority of crashes do not occur at the edges of the envelope, and are categorized as CFIT (Controlled Flight Into Terrain).  When within the aerodynamic envelope, Boeing and Airbus aircraft are usually under the control of the same sort interchangeable flight management computers.

Both the Asiana (Boeing) and Air France (Airbus) crashes were caused by crew that did not understand the systems of the aircraft they were flying.  Both aircraft impacted terrain under full control.

Assorted links

by  Tyler Cowen

1. More on what is going on in Turkey, from Monkey Cage.  And here is Dexter Filkins.

2. Equality of income or equality of respect?  And Lane Kenworthy on why income inequality should not be the main focus (pdf).

3. Hobo nickel art.

4. Interview with Psychology Today about Average is Over.

5. Why it is hard to cut (some parts of) government spending.  And how badly will Italian opera fall apart?

6. Strand bookstore reports best sales ever.

7. Your doctoral thesis in one sentence, via Angus.  The first person, by the way, needed two sentences.

*The Second Machine Age*

by  Tyler Cowen in

The authors are Erik Brynjolfsson and Andrew McAfee, and the subtitle is Work, Progress, and Prosperity in a Time of Brilliant Technologies.

I have written enough on related issues that a review seems pointless, but after having read it through I will say a) it will be one of the most important books of the coming year, and b) everyone should read it.  It will be out January 20, 2014.

Here is Pethokoukis on the book, with a handy summary.  Here is a new Tim Harford column citing the book.

Why does Singapore have such a low birth rate?

by  Tyler Cowen in

In the comments, Collin asked:

How is it the most productive, functional country Singapore has one of the lowest birth rate in the world? Is this robot future in which only the better off have children? Why is it richer the world is the less people can afford children?

Right now the total fertility rate in Singapore is at about 1.2 and at times it has slipped down as far as 1.16.  (Though it just went up to 1.29, perhaps because of “dragon babies,” noting that intertemporal substitution may snatch some of this back.)  Why?

1. Singapore does education very well, and education lowers birth rates.

2. Singapore land and housing prices are especially high, which makes it very costly to have a family with three kids.  Long working hours are expected too.

3. Singapore is a lot more fun than it used to be, and in this regard it has improved more than say France has.  Children are a bit more fun, because modern life is safer, but “the fun of children” is subject to Baumol’s cost disease.

4. Women are doing very well in Singapore and arguably they are not so willing to marry down in terms of income and educational status.  I was struck, when I gave a talk to the economists at the Civil Service College in Singapore this summer, that well over half the audience was female.  Sadly for some, rates of female “singlehood” for women in their twenties are still rising (pdf, very useful).  Controlling for education, however, female singlehood is not going up, which indicates the decline in fertility is related to the rise in education.  And in that same piece you will find direct evidence for a “marriage squeeze” for well educated women and less educated men.  That same squeeze doesn’t seem as strong in the other wealthy East Asian countries.

5. This 209 pp. cross-national comparative study (pdf, also very useful) suggests that Singapore’s generous childbearing subsidies do not work because women are still expected to shoulder so many responsibilities of child rearing.  The traditional family model there is stronger than in say France.  At the same time, France is a culture of leisure, long vacations, and limited work hours in a way which is quite far from practices in Singapore.

6. Modern fairytales do not work.  Rap music also does not work (try this video, if you need help), nor do government-sponsored cruises and speed dating services.

7. It is suggested that population density lowers birth rates.

8. Child care and subsidized child care have been less common in Singapore than in France (see about p.119 of this pdf, the comparative study cited above), though Singapore has been changing in this regard.

Here is a typical Singaporean answer to the question:

What is stopping you from having more than 1-2 children?
“Very stressful, because when they misbehave, you have to scold them.”

Why do you think some Singaporeans are not having children nowadays?
“It is very stressful for Singaporeans as the cost of living has gone up and they do not have time for their children. More women are now busy working too.”

If you are interested in the comparison, ethnic Chinese in Malaysia have a total fertility rate of about 1.8.  Malays in Singapore have a TFR of about 1.6, whereas the ethnic Chinese and ethnic Indians in Singapore are just barely above 1.0.  To me that suggests that both culturally-specific-to-Chinese-high-earner factors and cost-of-living-in-Singapore factors are playing a significant role.  Malay population growth, in terms of Malay babies born in Malaysia, is robust.  Perhaps Singaporean men need more confidence.  In Shanghai, by the way, the rate is barely above 1.0.

If I had to put it all in a sentence, I might try this: in Singapore, work and educational norms have shifted far faster than have family norms, relative to other birth-subsidizing countries such as France.

Note, most of all, that the low birth rate in Singapore is not the fault of Lee Kuan Yew.

Upon which day of the week should Christmas fall?

by  Tyler Cowen in

I say the goal is to minimize non-convexities, which in this context means avoiding the possibility of no mail or UPS deliveries for two days running.  That makes Saturday and Monday especially bad days to have Christmas.

When Christmas is on Wednesday, as it was this year, on that Wednesday you still can be reading the books which arrived on Tuesday and then a new lot comes on Thursday.  The public libraries also close for only one day, not two or three in a row.

Christmas on Wednesday also means that the roads are deserted for all the other weekdays, since many people end up leaving town for the entire week.  Then you can visit all those ethnic restaurants you wanted to get to in Gaithersburg or Mount Vernon without hassle.

And if you are taking a vacation abroad, and trying to use a limited number of vacation days, you certainly don’t want Christmas to fall on either a Saturday or a Sunday, which in essence wastes a granted day off.

You know what is also good about Christmas on Wednesday?  It means New Year’s Day will be on Wednesday too, double your pleasure double your fun.

Most Popular MR Posts of 2013

by  Alex Tabarrok

Here is my annual round-up of the most popular MR posts of 2013 as measured, somewhat eclectically, using the number of links, tweets, shares, comments and so forth. Sadly, the post that was most linked to this year was by neither Tyler nor myself but by… Tyrone.

Look people, I have explained this before. Tyrone is a bad man. Do Not Encourage Tyrone. Fortunately for us Tyrone doesn’t like it when people like him. 

Second most highly linked was my post No One Is Innocent. I was also pleased that a related post, Did Obama Spy on Mitt Romney?, was also highly linked although I think that the question raised in this post about the potential for NSA tools to be abused for political purposes hasn’t been truly addressed in the main stream media. Conor Friedersdorf at The Atlantic in The Surveillance State Puts U.S. Elections at Risk of Manipulation was one of the few people to pick up on this important question.

Also highly linked were my post The Great Canadian Sperm Shortage and a few less substantive items drawn mostly from elsewhere such as Equal Population US States and What is the Most Intellectual Joke You Know.

If you followed Tyler’s timely advice in another highly linked post, China, and the soaring price of Bitcoin, you would have saved yourself from a big loss (albeit you would have made an even bigger profit by ignoring Tyler’s earlier advice).

The most shared post was Tyler’s Stereotyping in Europe with over seven thousand shares, followed by Nobody dislikes inflation more than strippers. I was pleased that a bunch of my substantive posts were highly shared including:

Another highly shared and commented upon post was Our DNA, Our Selves on the FDA and 23andMe. Mark my words, when this or similar case goes to court the FDA will eventually lose on free speech grounds.

Gun posts get lots of comments including The Culture of Guns, The Culture of Alcohol, Guns, Suicide and Natural Experiments, Firearms and Suicides and How Japan Does Gun Control.

Question posts such as Who is the Worst Philosopher? and Who is the most influential public intellectual of the last twenty-five years? get lots of comments as did Who is Juan Galt?

There is overlap between most linked, shared, and commented so some of the above would fit in several categories but it’s surprisingly weak. Posts with a lot of comments, for example, often do not draw lots of links.

What were your favorite posts of 2013? And what requests do you have for 2014?

Duopolistic battle between two man-machine visions

by  Tyler Cowen in

Sometimes when I talk about driverless cars I am asked to what extent we already have driverless planes today.  The answer is a bit complicated:

The broader issue…is raised in an FAA report: “For any given situation, who will have final control authority?”  The pilot or the flight management computer?  Aircraft manufacturers and their automation designers have somewhat different philosophies.  Airbus has tended to favor the machine — its automation is designed essentially to prevent the plane from getting outside its safe “flight envelope” no matter what the pilot does.  Meanwhile, Boeing tends to give the pilot the final word — and its adherents can be adamant.  A Boeing-flying Delta captain puts it this way: “When shit hits the fan, a pilot should be able to disengage all the magic and fly the airplane with basics…All you can do is hope the software engineers haven’t screwed you with some magical sub-mode that, [sitting] in an office with a nice warm cup of coffee, makes sense at the time.”  For every fan of Airbus’s “make-it-impossible-to-crash” approach, there’s a proponent of Boeing’s support for new cockpit technology only where “there is no adverse effect to the human-machine interface.”

That is from Mark Gerchick’s Full Upright and Locked Position: Not-so-Comfortable Truths about Air Travel Today, a pretty good book although much of the material may be already known to some of the potential readers.

Here is a recent FT article about the advent of self-driving ships.

What I’ve been reading

by  Tyler Cowen in

1. Margaret MacMillan, The War that Ended Peace: The Road to 1914.  Good even if you think, as I do, that you are sick of WWI books.

2. Hermione Lee, Penelope Fitzgerald: A Life.  This book made many UK “best of” lists.  It is subtle, like the author herself, and will prompt you to further reading or rereads, for instance I enjoyed The Gate of Angels right after this biography and soon will try Offshore.

3. Drew Daniel, 20 Jazz Funk Greats, in the 33 1/3 series.  On the Throbbing Gristle album of the same name, this superb book is one of the best and most instructive pieces of popular music criticism I have read, ever.  I recommend reading it while listening to the album, song by song.  Drew Daniel by the way is part of the group Matmos (interesting in their own right) and an English professor at Johns Hopkins.  He deserves something better than tenure.

4. Samuel Scheffler, Death & the Afterlife, with commentaries from other famous philosophers at the back.  The bottom line: through the careful use of thought experiments, we can infer that we care about the impersonal future more than we might think.  Scheffler is still getting better and deeper as a philosopher.  This Thomas Nagel review of the book is gated, but even the first few (ungated) paragraphs are worth reading.

5. Michael Avery and Danielle McLaughlin, The Federalist Society: How Conservatives Took the Law Back from Liberals.  Self-explanatory.

Walter Oi has passed away

by  Tyler Cowen in

Here is an appreciation from David Henderson.  Here is an appreciation from Steve Landsburg.  Oi played a key role in helping to end the military draft, he was a mainstay of the Rochester economics program, he wrote an essential piece on the economics of two-part tariffs, he analyzed the implications of labor as a fixed factor for employment over the course of the business cycle, and also he was known for having overcome blindness to pursue a very successful career.  Here is Oi on scholar.google.com.