Does natural resource wealth imply technological stagnation?
Peter Thiel tells us:
Look at the Forbes list of the 92 people who are worth ten billion dollars or more in 2012. Where do they make money? 11 of them made it in technology, and all 11 were in computers. You’ve heard of all of them: It’s Bill Gates, it’s Larry Ellison, Jeff Bezos, Mark Zuckerberg, on and on. There are 25 people who made it in mining natural resources. You probably haven’t heard their names. And these are basically cases of technological failure, because commodities are inelastic goods, and farmers make a fortune when there’s a famine. People will pay way more for food if there’s not enough. 25 people in the last 40 years made their fortunes because of the lack of innovation; 11 people made them because of innovation.
I also liked this bit:
One of the smartest investors in the world is considered to be Warren Buffett. His single biggest investment is in the railroad industry, which I think is a bet against technological progress, both in transportation and energy. Most of what gets transported on railroads is coal, and Buffett is essentially betting that after the 21st century, we’ll look more like the 19th rather than the 20th century. We’ll go back to rail, and back to coal; we’re going to run out of oil, and clean-tech is going to fail.
This very useful post collates and presents all of Peter’s evidence for his view that modern technology has been stagnating. It is both “interesting throughout” and “self-recommending.” It is from this blog by Dan Wang.
I very much liked Peter’s new book, Zero to One: Notes on Start-Ups, or How to Build the Future.
What I’ve been reading
1. Kai Bird, The Good Spy: The Life and Death of Robert Ames. Kai Bird is very highly rated, but in my view he remains underrated. I very much like each and every one of his books, and this sympathetic treatment brings to life the Middle East conflicts through the 1980s, and also the life of a CIA officer, as well as a bygone era in U.S. foreign policy.
2. Henry Kissinger, World Order. I liked parts of his China book, but there’s nothing really to this one. Leave it alone.
3. Pascal Bonafoux, Rodin & Eros. Beware of visiting too many Rodin museums, you might end up thinking he just repeated the same themes over and over again. This book, including the color plates, will jolt you into seeing his work fresh once again.
4. Samuel Fromartz, In Search of the Perfect Loaf: A Home Baker’s Odyssey. A fun cross-sectional look at the bread universe, combined with some recipes and reminiscences.
5. Henry R. Nau, Conservative Internationalism: Armed Diplomacy under Jefferson, Polk, Truman, and Reagan. We could use more of this, and I am referring to each of those words “conservative” and “internationalism,” as well as the combination of the two. This book was published about a year ago, and I don’t think the author could have realized how relevant it was going to become. An important book for 2014, it sets out a manifesto for a classical liberal but non-isolationist approach to foreign policy.
6. Jeff Riggenbach, Persuaded by Reason: Joan Kennedy Taylor and the Rebirth of American Individualism. I knew her a bit and was always fond of her. This book is a good look at 1970s libertarianism, and the rebirth of libertarian feminism in the United States. Both Alex and I make cameos in the text, he as an editor, gatekeeper, and theorist of self-ownership and abortion, I as a purchaser of the CD collection from the estate of Roy Childs (Joan was executor of the estate and also Roy’s dear friend).
I’ve spent time with both the new Ian McEwan novel and the new David Mitchell. Both have some virtues but neither appears to be a must-read.
South Korea markets in everything
Fake casts for pretending you have an injured arm to evade having to help prepare holiday meals have become brisk sellers in South Korea ahead of the Chuseok festival.
“We have been selling this for 10 years now, but sales increased drastically starting last week,” said a sales manager at an online vendor who declined to be identified.
Both men and women were buying the bogus casts, he said.
During Chuseok, a three-day thanksgiving holiday, women traditionally do most of the work in preparing and cooking elaborate ceremonial dishes while the men of the family chat, drink and watch television.
The holiday gender divide is so entrenched that it has spawned the term “daughter-in-law holiday syndrome”, with many young women suffering post-holiday stress and fatigue.
But getting away with the phoney cast ruse may be difficult this year after several media outlets reported on brisk sales of the devices in the run-up to the holiday starting on Sunday.
Data from the Ministry of Gender, Equality, and Family in 2010 showed only 4.9 percent of people surveyed said both genders shared holiday chores, while the rest said women do most of the work.
There is more here, and for the pointer I thank David Lee.
Assorted links
1. Amazon and the Coase theorem.
2. Is this Coase failing or succeeding?
3. How do scientists feel about Scottish independence?
4. Blue whales are making a comeback.
5. Credit Suisse warns of grave deflationary shock for Scotland.
6. Ancient Egyptian art contains the records of past extinctions. Why fight over an island in the South China Sea when you can make one?
Just a reminder about Abenomics in Japan
Unemployment is at 3.7 per cent. Recently, it has been as low as 3.5 per cent, considered by some economists to be pretty much full employment.
That’s one big reason why all that stimulus just won’t have all that much oomph. It is odd how rarely you hear this mentioned, perhaps because “free lunch” thinking is back in vogue these days. The entire piece, by David Pilling at the FT, is interesting, it focuses on job market polarization in Japan. Here is on bit on that:
Outside the ranks of the protected “job-for-lifers” – a much rarer breed these days – nearly 40 per cent of workers are about as flexible as you get. They work in poorly paid jobs for hourly rates. Benefits are all but non-existent. For most of these workers, sometimes referred to as the “precariat”, unemployment is a mere “sayonara” away.
dyfalu
In Welsh poetry, dyfalu is the piling on of comparisons, definition through conceit. The word also means “to guess” in Welsh, and many poems of dyfalu have an element of guesswork, a fanciful and riddling dimension. “The art of dyfalu, meaning “to describe” or “to deride,” rests in the intricate development of a series of images and extended metaphors which either celebrate or castigate a person, animal, or object,” the encyclopedia of Celtic Culture explains. Dafydd ap Gwilym’s poems to the mist and the wind are classic fourteenth-century examples.
That is from Edward Hirsch, A Poet’s Glossary, which I am quite enjoying. There is interesting material on every page and it is written with passion. A hendiatris is a “figure of speech in which three words are employed to express an idea, as in Thomas Jefferson’s tripartite motto for the Declaration of Independence: “Life, liberty, and the pursuit of happiness.”” When there are only two words so employed, it is of course a hendiadys.
Jason Sorens on Scottish independence
From a longer post:
A closer look reveals that different stocks responded differently to the poll news. Two transportation companies, FirstGroup and Stagecoach Group, lost virtually nothing, and Aggreko, which rents temperature control systems, lost absolutely nothing. Financial and energy/power companies were pounded. An engineering company closely linked to the oil industry, the Weir Group, took a more modest 1.0% loss.
How to sum up?
So far capital markets seem to be telling us that the economic costs of independence to Scotland would be significant but not catastrophic, and that they would be virtually nil to the rest of Britain. How much of those costs are due to the policies Scotland would implement after independence, rather than secession as such? It is difficult to know, but the differential returns to particular firms give us a clue. Transportation companies have closer links to the state, so a more statist policy regime might not hurt them. Financial companies might lose because of the lender of last resort issue (Scotland might not have a credible one). Energy and engineering companies might lose because nationalists want to tax oil heavily to fund social programs. Also, stricter environmental laws may hurt the electric utility SSE, which lost heavily on Monday.
Speculatively, then, capital markets seem to be telling us that the costs of secession as such are modest, but that the costs of dramatically different economic policies are substantial.
But I find this earlier bit less optimistic:
What would happen to these firms’ value if independence were dead certain? Expected utility analysis helps us here. They lost $800 million in value on an increase in the probability of independence of 5.5+2.7=8.2%. We can infer that an increase from 20% to 100% would wipe out $800 million*8/.6=$7.8 billion. That’s a fair proportion of their existing value: about 16%.
There is more here, and for the pointer I thank Chaim Katz.
DJs are now making mistakes on purpose
Graham writes:
DJs all over the world are now deliberately making mistakes during their mixes to prove to fans and critics that they are in fact real DJs.
The latest craze, known as miss-mixing, is proving very popular amongst digital DJs as a way of highlighting that they are actually manually mixing tracks rather than using the sync button.
Michael Briscoe, also know as DJ Whopper, spoke about miss-mixing with Wunderground, “Flawless mixing is now a thing of the past, especially for any up and coming digital DJs. You just can’t afford to mix without mistakes these days or you’ll be labelled as a ‘sync button DJ.’”
“I learned how to mix on vinyl years ago so naturally I’m pretty tight when it comes to matching beats,” continued the resident DJ. “I swapped to digital format a couple of years ago because it’s convenient, now I spend more time practicing making mistakes than I do practicing actual mixing.”
Of course the software can toss in some mistakes too…good luck.
For the pointer I thank Will Ivy.
Assorted links
1. Progress on making graphene more commercially viable.
2. The chocolate teapot (there is no great stagnation).
3. Podcast of Ray Dalio and Larry Summers (I haven’t heard it yet myself).
4. Why the current campaign against inversion will prove counterproductive.
What should we infer from Obamacare rate increases?
Robert Laszewski writes:
The 2015 rate increases have been largely modest. Does that prove Obamacare is sustainable? No. You might recall that on this blog months ago my 2015 rate increase prediction was for increases of 9.9%.
You might also recall my reason for predicting such a modest increase. With almost no valid claims data yet and the “3Rs” Obamacare reinsurance program, insurers have little if any useful information yet on which to base 2015 rates and the reinsurance program virtually protects the carrier from losing any money through 2016. I’ve actually had reports of actuarial consultants going around to the plans that failed to gain substantial market share suggesting they lower their rates in order to grab market share because they have nothing to lose with the now unlimited (the administration took the lid on payments off this summer) Obamacare reinsurance program covering their losses.
We won’t know what the real Obamacare rates will be until we see the 2017 rates––when there will be plenty of valid claim data and the Obamacare reinsurance program, now propping the rates up, will have ended.
The post has other interesting points.
Scotland fact of the day
Scottish banking assets 1,200% of GDP, more than Iceland, Ireland and Spain in 2007.
That is from Robin Wigglesworth. Of course exactly for this reason, RBS probably would not end up domiciled in a newly independent Scotland.
Let’s hope the #royalbaby manages to keep the Scots on board.
Roving Bandits
Yesterday, Tyler linked to an important report from the Washington Post showing how “aggressive police take hundreds of millions of dollars from motorists not charged with crimes.” The report and video are shocking.
The aggressive tactics documented by the Post have mostly been deployed against motorists who are unlucky enough to be stopped for a moving violation. An apparently leaked document, however, shows that these programs are likely to expand far beyond motorists.
The economics of reclining your airplane seat
I believe Josh Barro started this mess of a debate.
I would emphasize the endogeneity of transaction costs. The airlines could do a lot to encourage Coasean bargaining between fliers, but they don’t. How about handing out little cards?: “Have a friendly haggle with the person behind you. Last year the average price for a non-reclined seat was $16.50.” They could print up standardized contracts, like how they distribute customs forms, including contracts for trading seat assignments or distance from the bathrooms or how you shush your child, or not. Imagine being nudged toward a deal through the in-flight internet system, so you don’t have to turn around to face the other party in the bargain. They could take a cue from Alvin Roth and his matching algorithms or help you set up complex multi-party deals, like how the Denver Nuggets used to construct (and then dismantle) their rosters.
Nada.
The disutility of bargaining in this environment is high relative to the value at stake. The chance of irritation or hurt feelings is non-negligible, and perhaps people on a flight are crankier anyway. So the airlines deliberately keep the transactions costs high, as the gains from the potential bargain are low relative to the ickiness of the process. The airlines wish to keep a lot of people away from the process altogether, if only out of fear of having to arrest people, divert flights, and so on.
That implies the more we debate this problem, the worse it becomes. It also gives us the true Coasean answer to what is best. Relative to current norms, who does more to make the whole question “an issue” — the seat recliner or the purchaser of the recliner-blocker? Clearly it is the purchaser of the blocker and thus Josh Barro is broadly in the right, the norm should continue to allow people to recline their seats as that minimizes fuss, which is more important than getting the right outcome with the seat itself.
If you don’t like that, United does sell coach seats with extra space, which makes the recline of the person in front of you less bad.
Assorted links
1. Very good Krugman column on why Scottish independence is a dangerous idea.
2. History of the Darien Project.
3. “They’re manipulating all of us.”
4. Do limited health network plans in fact control costs?
5. Larry Summers on secular stagnation and the importance of the supply side.
6. Is American military spending equal to that of the rest of the world?
What I’ve been reading
1. Michael Ignatieff, Fire and Ashes: Success and Failure in Politics. A genuinely interesting book about why someone with tenure at Harvard might be crazy enough to run for high public office, and then what it is like to lose somewhat ignominiously.
2. Ha-Joon Chang, Economics: The User’s Guide. A genuinely humble and pluralistic introduction to the economic way of thinking, from a “developmentalist,” linkages are important for economic growth, anti-free trade point of view.
I disagree with both Ignatieff and Chang pretty thoroughly, but of the last few dozen books I read, these are the two which are truly philosophical, in the best sense of that word. There is no need to list the others, except there is Umberto Eco on Peanuts, scroll down about four paragraphs to start reading.