*The Fourth Revolution*

by  Tyler Cowen in

That is the new book by John Micklethwait and Adrian Wooldridge, with the subtitle The Global Race to Reinvent the State.

I very much liked this book.  It is probably the best current manifesto on the proper roles for market and state, intelligent but also accessible to a lay reader.  For me the biggest takeaway was the import of the technological revolutions coming to government, or already arrived, and how countries do not have the luxury of sitting still in response.  Looking forward, quality of government will be an increasingly important competitive factor.  This book is also the single best statement of the thesis that these days government simply is not working very well, and that such an insight is recognized by many voters better than by many intellectuals.  Many of the illustrations of this point come from the state of California.

One interesting feature of this book (not its main point, nor a point the authors are celebrating) is the recurring recognition that democracy has diminished in global status over the last decade.

From the book, here are two facts about China:

In 2012 revenue from land-rights sales made up more than half of local-government tax revenue.

And:

The Beijing-based Unirule Institute of Economics argues that, when you allow for all the hidden subsidies such as free land, the average real return on equity for state-owned companies between 2001 and 2009 was -1.47 percent.

Definitely recommended.

From the comments

by  Tyler Cowen in

Here is Brett on Piketty:

I’m surprised to see so few critiques of Piketty on the grounds that higher wealth and income inequality won’t necessarily lead to oligarchical politics and the capture of the economy by rentiers. I’m a bit skeptical myself of his interpretation of 19th century politics – at the same time we had the Belle Epoque, there was increasing working class political power in the UK (particularly with reforms in the 1830s and 1860s), the lead-up to the near-complete loss of political power in the House of Lords in 1911, the rise of income taxes in both the UK and France, greater social mobility, broader modernization and consumer culture, and so forth. You see some pushback from Larry Bartels and the like pointing to research showing policymaking following the preferences of the rich and organized, but they don’t provide much information about whether this has changed with increasing income and wealth inequality – the rich and organized interest groups may have just always had a disproportionate interest on policymaking, even during the Postwar Period.

Morgan Kelly, in his review (via John O’Brien), serves up a related point:

If Piketty’s story about slow growth leading inevitably to rising inequality and the power of the rich is true, then we expect that inequality would have risen sharply during the 19th century when growth in industrialised economies was less than 1 per cent per year. In fact the longstanding research of Peter Lindert and Jeffrey Williamson on English inequality (which Piketty, incredibly, fails to cite) finds inequality was fairly constant, albeit high, until about 1870, and then appears to have fallen somewhat until 1913.

What is the economic future of literature?

by  Tyler Cowen in

Could it be as an add-on to higher-margin, branded carry-away commercial products?  Here is one new development:

Starting Thursday…bags and cups in Chipotle’s stores will be adorned with original text by Foer, Malcolm Gladwell, Toni Morrison, George Saunders, and Vanity Fair contributing editor Michael Lewis.  Foer says, ”Chipotle refrained from meddling in the editorial process for the duration of the initiative, which the burrito chain has branded Cultivating Thought. “I selected the writers, and insofar as there was any editing, I did it,” Foer said. “I tried to put together a somewhat eclectic group, in terms of styles. I wanted some that were essayistic, some fiction, some things that were funny, and somewhat thought provoking.”

You can read more here, via @ArikSharon.

The Americanization of China?

by  Tyler Cowen in

Yaoming

Former NBA star Yao Ming is being sued by Beijing resident Feng Changshun for endorsing a health food product that Feng said misleads consumers, in one of the first consumer rights cases involving a celebrity since a new protection law was enacted in March.

Feng is suing Baxsun Pharmacy, a retail chain in Beijing, for exaggerating the benefits of its fish oil capsules.

Yao, a spokesman for the product, is also being sued. Beijing’s Xicheng district court has confirmed that it will hear the case.

Feng said he is seeking 500 yuan ($80.10) in compensation from the retail chain and 0.01 yuan from Yao Ming.

“(The lawsuit) is symbolic. I want (Yao Ming) to admit to infringements of my rights,” he said.

You can read more here.

Is globalization bypassing New Zealand?

by  Tyler Cowen in

Bryce Wilkinson and Khyaati Acharya write:

A report in 2012 by The New Zealand Initiative drew attention to New Zealand’s seventh position among 57 countries for having the most restrictive FDI regulatory regime. This was largely due to New Zealand’s economy-wide screening regime and the broad definition of ‘sensitive’ land. Treasury has confirmed that there is credible anecdotal evidence that New Zealand’s regime is having a chilling effect on inwards FDI investment, but the materiality of this effect is an open question. It is doubtful that the damaging Crafar farms case would have triggered regulatory barriers in other Anglo-Saxon jurisdictions or comparable Asian countries.

New Zealand’s Overseas Investment Act further detracts from the country’s ‘open for business’ image by starkly asserting that it is a privilege for foreigners to be allowed to own or control sensitive New Zealand assets. This is in stark contrast to the explicitly welcoming approach widely taken elsewhere.

Statistics show that New Zealand has largely missed out on the expansion of global FDI since the mid-1990s. Both inwards and outwards stocks of FDI peaked as a percentage of GDP more than a decade ago in New Zealand, while world stocks continued their upwards climb. Between 2000 and 2011, New Zealand’s rank on UNCTAD’s FDI attraction index slumped from 73rd in the world to 146th. Hong Kong and Singapore have been in the top five throughout this period.

The longer study (pdf) covers many other points.  And here are further writings by Bryce Wilkinson on New Zealand.

How eager is China to limit environmental damage from climate change?

by  Tyler Cowen in

They already have ruined the environment here, beyond what most people are willing to believe.  And for a long time to come.  Preventing further environmental damage by limiting climate change seems to the Chinese leadership like a small gain in comparison to the losses which already have been incurred.  Furthermore as Chinese environmental damage accumulates, in relative terms the climate change issue may loom smaller rather than larger.

This simple point is not well understood.  Consult the framework from Charles Karelis’s The Persistence of Poverty.

People here talk about the environment more than any place I have been — ever — but they are not talking about climate change.

Are home pages dying? And what is the value of a shadow reader?

by  Tyler Cowen in

Ezra Klein has a very good post on this topic.  He notes that for The New York Times:

…home page traffic has fallen by half over the last two years. This is true even though the NYT’s home page has been beautifully redesigned, and the NYT’s overall traffic is up.

The value of the company is up as well.  And then:

This is the conventional wisdom across the industry now: the new home page is Facebook and Twitter. The old home page — which is the actual home page — is dying a slow, painful death.

I’m skeptical. The thing about “push media” is someone needs to do the pushing. Someone has to post an article to Twitter or Facebook. That can be the media brand. It can even be the journalists. But when articles work it’s really coming from the readers.

Those readers of course are often the dedicated ones who find the article on your home page.  Ezra makes this additional point in passing, which I think is a neat example of how counterintuitive microeconomics can hold in the world of the internet:

Some of the most committed users are still clicking through the RSS feed (which is one reason Vox maintains a full-text RSS feed).

I would put it this way: the fewer people use RSS, the better content providers can allow RSS to be.  There is less fear of cannibalization, and more hope that easy RSS access will help a post go viral through Facebook and other social media.

When a blog is linked to the reputations of its producers, rather than to advertising revenue, the home page remains all the more important.  That is who you are, and many people realize that, even if they are not reading you at the moment.  I call those “shadow readers.”  For MR, I have long thought that the value of shadow readers is quite high.  (“Tyler and Alex are still writing that blog — great stuff, right?  I don’t get to look at it every day [read: hardly at all].  Why don’t we have them in for a talk?”)  In other words, a shadow reader is someone who hardly reads the blog at all, but has a not totally inaccurate model of what the blog is about.  For Vox or the NYT the value of a shadow reader is lower, although shadow readers still may talk up those sites to potential real readers.  For companies which run lots of events, such as The Atlantic, the value of shadow readers may be high because it helps make them focal even without the daily eyeballs.

What if everyone were a shadow reader?  What is the MRS between real readers and shadow readers?  And which are you?  Can a shadow reader sometimes be better to have?  After shadow readers don’t get so upset with you and don’t so much expect that you will write to please them!

Can you trust Chinese government statistics?

by  Tyler Cowen in

Political scientist Jeremy Wallace has a recent paper on this topic:

Economic statistics dominate policy analyses, political discussions, and the study of political economy. Such statistics inform citizens on general conditions while central leaders also use them to evaluate local officials. Are economic data systematically manipulated? After establishing discrepancies in economic data series across regime types cross-nationally, I dive into sub-national growth data in China. This paper leverages variation in the likelihood of manipulation over two dimensions, arguing that politically sensitive data are more likely to be manipulated at politically sensitive times. GDP releases generate headlines, while highly correlated electricity production and consumption data are less closely watched. At the sub-national level in China, the difference between GDP and electricity growth increases in years with leadership turnover, consistent with juking the stats for political reasons. The analysis points to the political role of information and the limits of non-electoral accountability mechanisms in authoritarian regimes as well as suggesting caution in the use of politically sensitive official economic statistics.

All good points.  I would stress, however, that Chinese statistics have many problems in them and so they are not simple overestimates of how the economy is doing, at least not over the last thirty years as a whole.  In some ways Chinese growth statistics have been, until 2008-2009, probably underestimating the actual progress on the ground.  In general, growth figures underestimate progress when changes are large, and overestimate progress when changes are small.  (One reason for this is that extreme progress brings a lot of new goods to the market and their marginal value is underestimated by their price ex post, since it is hard to adjust for the fact that the price ex ante was infinite or very high.)  In Western history for instance, our most significant period of growth was probably the late 19th through early 20th century, when the foundations for the modern world were laid, yet estimated growth rates for this period are not astonishingly high.  We’re missing out on the values of the new goods, for one thing.

For the pointer I thank Henry Farrell.

Against against commodification (markets in everything)

by  Tyler Cowen in

Jason Brennan reports:

Commodification is a hot topic in recent philosophy. There’s a limitless market for books about the limits of markets. The question: Are there some things which you permissibly may possess, use, and give away, but which are wrong to buy and sell? Most authors who write about this say yes. Peter Jaworski and I say no. There are no inherent limits to markets. Everything you may give away you may sell, and everything you may take for free you may buy. We defend that thesis in our book Markets without Limits, which will be published by Routledge Press, most likely in late 2015 or early 2016. As of now, we have a completed first draft.

We plan to commodify the book itself. We will sell acknowledgements in the preface of the book.

There is more information here.  I thank Michael Wiebe for a relevant pointer.

Academia as a bastion of free speech?

by  Tyler Cowen in

I was not aware how many of these cancellations have been piling up:

Haverford College on Tuesday joined a growing list of schools to lose commencement speakers to protests from the left, when Robert J. Birgeneau, a former chancellor at the University of California, Berkeley, withdrew from this weekend’s event.

Some students and faculty members at Haverford, a liberal arts college near Philadelphia, objected to the invitation to Mr. Birgeneau to speak and receive an honorary degree because, under him, the University of California police used batons to break up an Occupy protest in 2011. He first stated his support for the police, and then a few days later, saying that he was disturbed by videos of the confrontation, ordered an investigation.

Those at Haverford who objected to his being honored asked Mr. Birgeneau to apologize and to meet a list of demands, including leading an effort to train campus security forces in handling protests better; he refused.

Mr. Birgeneau bowed out a day after Smith College said that Christine Lagarde, head of the International Monetary Fund, had withdrawn from its commencement because of protests. Condoleezza Rice, the former secretary of state, said this month she would not deliver the address at Rutgers University after the invitation drew objections. Last month, Brandeis University rescinded an invitation to Ayaan Hirsi Ali, the Somali-born activist, over her criticism of Islam.

The story is here.  I have nothing to add to the obvious points here, but this is nonetheless worth emphasizing.