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Russian bonds now investment grade

Baa3, that is. Here is the Financial Times story.

Russia’s debt to gdp ratio is 28 percent, Japan’s is 140 percent, but obviously Japan has more accumulated trust.

How much do these ratings make sense?

On May 31 the U.S. credit-rating agency Moody’s Investors Service lowered by two notches Japan’s credit rating on yen-denominated bonds issued by the government. Japan’s previous credit rating was Aa3, the fourth highest grade and already the lowest among developed nations. This was downgraded to A2, placing Japan below such nations as Chile and Botswana and on par with Israel, Poland, and the Republic of South Africa. As a reason for the downgrade, Moody’s stated, “There exists nothing within present financial policy that can put the brakes on the worsening debt situation.” The outlook for the credit rating is “stable,” so the series of downgrades appears to have ended for the time being. In addition, Japan’s government bonds issued overseas maintained their Aa1 rating with a “stable” outlook. Moody’s had announced in February that it was considering downgrading Japanese bonds and continued considering the matter based on the state of the Japanese economy and government finances.

Here is the link for the Japanese comparison. You might note that Botswana, although it received a higher rating than Japan, has Japan as its largest creditor.

Saturday assorted links

1. “In sports, South Korean women generally outnumber men in the stands.” (NYT)

2. Why don’t people talk about fat-tailed sheep more?

3. China-Africa donkey trade wars? (NYT)  Donkey nationalism!

4. “Roosevelt fixed his VP mistake.

5. New Oliver Kim Substack, he is an economist from Berkeley, first piece is on public housing.

6. Small towns building statues to fictional characters.

*Empire, Incorporated*

The author is Philip J. Stern, and the subtitle is The Corporations that Built British Colonialism.  Too many history books run through various motions, whereas this one tries to explain “how things really were” for the interested reader.

Here is one representative bit:

As great as its ambitions were, at its origins the East India Company was, like its predecessors and contemporaries, essentially a tentative experiment fueled by a hesitant and hybrid institutional and financial structure.  The “company” did not have a single permanent stock.  Rather, it was organized as a series of consecutive quasi-independent stock subscriptions, at first opened on a per venture basis and later established for set terms in years.  In its early days, the limited number of shareholders could “take in men under them,” in theory dividing any individual share into a subsidiary, shadow joint stock.  As in many other ventures, the East India Company spent its early years chasing down under- and unpaid subscriptions.

The book has plenty of good coverage of Borneo and also Africa as well, the latter sections being especially relevant to some of the charter cities plans of our current day.  And there is plenty of Edward Gibbon Wakefield, who brought the ideas of agglomeration externalities into economics, and promoted a version of charter cities for southern Australia.  How sadly neglected he is these days.

I had not known that the Falklands Island Company still controls so much in the Falklands.  Recommended, due out in May.

My excellent Conversation with Paul Salopek

Here is the transcript and audio, here is the summary:

Paul Salopek is a Pulitzer Prize-winning journalist and National Geographic fellow who, at the age of 50, set out on foot to retrace the steps of the first human migrations out of Africa. The project, dubbed the “Out of Eden Walk,” began in Ethiopia in 2012 and will eventually take him to Tierra Del Fuego, a distance of some 24,000 miles.

Calling in just as he was about to arrive in Xi’an, he and Tyler discussed his very localized supply chain, why women make for better walking partners, the key to crossing deserts, the most difficult terrain to traverse, what he does for exercise, his information prep for each new region, how he’s kept the project funded, why India is such a good for walkers, which cuisines he’s found most and least palatable, what he learned working the crime beat in Roswell, New Mexico, how this project challenges conventional journalism, his thoughts on the changing understanding of early human migration, and more.

Here is one excerpt:

COWEN: What’s true is true. How is it that you crossed the desert? You’ve been through some of the Gulf States, I think.

SALOPEK: Yes, I’ve been through several deserts. The first was the Afar Desert in north Ethiopia, one of the hottest deserts in the world, and then the Hejaz in western Saudi Arabia, and then some big deserts in Central Asia, the Kyzyl Kum in Uzbekistan.

You cross deserts with a great attentiveness. You seem to want to speed up to get through them as quickly as possible, but often, they require slowing down, and that seems counterintuitive. You have to walk when the temperatures are congenial to your survival. Sometimes that means walking at night as opposed to the day. It means maybe not covering the distances that you would in more moderate climates.

Deserts are like a prickly friend. You approach them with care, but if you invest the time, they’re pretty inspiring and remarkable. There are reasons why old hermits go out into the deserts to seek visions. I was born in a desert. I was born in the Mojave Desert of Southern California, so I’m partial to them, maybe even by birth.

COWEN: Do you find deserts to be the most difficult terrain to cross?

SALOPEK: No, I find alpine mountains to be far trickier. Deserts can be fickle. Deserts can kill you if you’re not careful. Of course, water is the most limiting factor for survival.

But alpine mountain weather is so unpredictable, and a very sunny afternoon can turn into a very stormy late afternoon in a very quick time period. Threats like rock falls, like avalanches, blizzards — those, for me, are far more difficult to navigate than deserts. Also, I guess having been born in the subtropics, I don’t weather the cold as well, so there’s that bias thrown in.

COWEN: What do you do for exercise?

Recommended, interesting throughout.

The major revolutions I have seen in my lifetime

The nature, size of impact, and time horizons on all these vary greatly, but here is my list:

1. Moon landing, 1969.  Most of the impact still not felt, except for satellites.  My parents did let me stay up late at night to watch it.

2. The collapse of communism (1989-????).  Poland is a lovely country to visit, Shanghai is amazing.  I flew to eastern Europe once I could in 1989.

3. The rise of Asia.  Japan and South Korea starting around the time of my birth.  The rise of China for sure, and currently the rise of India is a likely addition.

4. Feminization, ongoing, no firm date.  Impact plenty.

5. The realization of the internet.  Hard to date, but I’ll say the 1990s and ongoing.

6. The smartphone — 2007.  Impact in your face.  Bought an iPhone the first day, was mocked by MR readers as an “Apple fan boy.”

7. Effective Large Language Models/AI.  Impact still to be seen.

The “African population explosion” is perhaps next in line…

Research ideas from Alice Evans

What Don’t We Know About Patriarchy?

Are you scrambling for research ideas? Below I outline some important questions, which existing research cannot answer

1.    Do joint families curtail men’s alcohol abuse and wife-beating?

2.    Do male-majority workplaces suppress female employment?

3.    Can gender quotas in male-majority workplaces reduce sexism?

4.    Why is the American Southeast so patriarchal?

5.    Does rule of law reduce brutish masculinity?

6.    Did Christianity curb Norse polygamy?

7.    Why are there so few female leaders in West Africa?

8.    When does religious diversity tighten patriarchal controls?

9.    Why is female employment so high among British Indians, but not British Pakistani or Bangladeshis?

And here is Alice Evans on Twitter.

Blockchains: A Promise Enforcement Engine

Anthony Lee Zhang on blockchains

How do blockchains change the state of things? Blockchains are an alternative system for promise enforcement, fundamentally different from any system human history has seen before. Promises in blockchain systems are enforced by miners, who — in reasonably competitive mining markets — have limited ability, and weak incentives, to do anything other than execute others’ promises roughly according to the gas fees they pay. In other words, the blockchain can be thought of as a universal, extremely low-discretion promise enforcement engine.

Consider, for example, automated market maker (AMM) protocols, such as Uniswap. An automated market maker allows anyone to become a liquidity provider, that is, to contribute capital, to make markets in a pair of tokens. Fees are collected from anyone trading with the market maker, and can be programmatically redistributed to liquidity providers. These “terms” are promises in the same way classic financial contracts are — but, rather than promises stated in English enforced in courts of law, they are written in Solidity and “enforced” by Ethereum miners.

Lending protocols, such as Aave, allow agents to borrow if they pledge their risky assets to the system as collateral. Aave values the collateral automatically using price oracles, and automatically seizes and liquidates collateral when the amount borrowed is worth too much compared to the collateral staked. MakerDAO similarly functions like a virtual “pawn shop”, taking risky assets and printing tokens whose value derives from the fact that they are overcollateralized by risky collateral, automatically valued using collateral price feeds. Aave and Maker function similarly to margin lending systems in traditional finance, except that the lenders are bots instead of banks. A nontrivially large fraction of the useful promises that are traded in financial systems, it seems, can be approximately as easily expressed in Solidity as they can in English, and thus can be enforced by miners rather than by courts.

The consequences of the existence of blockchains are thus that, for the first time in human history, we have a real alternative to governments and legal systems for the enforcement of promises. What are the effects this will have on the world?

Governments in developed economies are imperfect but they are adequate promise enforcers and they have reasons to suppress their competitor, blockchains. Hence Zhang argues:

…The future of finance will not be built on Wall Street, by a handful of privileged graduates from a handful of top colleges in a handful of high-income countries. The future of finance will be built on blockchains, in Africa, South America, Southeast Asia, through the combined efforts of many billions of people, who for the first time in human history will be able to participate on an equal footing in the market for promises.

This is similar to what Tyler and I write in cryptoeconomics:

Traditional finance relies on legal documents like contracts, titles, and personal identification and thus it ultimately relies on a legal system that can enforce those contracts quickly, reliably, and at low cost. Relatively few countries in the world have all the required abilities, which is why traditional finance clusters in a handful of places like New York, London, Singapore, and Zurich.

Decentralized finance, in contrast, relies on smart contracts and cryptographic identification that work exactly the same way everywhere. Decentralized finance, therefore, could be broader based and more open than traditional finance. Indeed, decentralized finance could prosper in precisely those regions of the world that do not have reliable legal systems or governments with the power to regulate heavily.

Saturday assorted links

1. “When Lee Jae-hye goes to the United States, she’s 30. When she’s back in South Korea, she’s 32.” (NYT)

2. Review essay on social media and political dysfunction.

3. The deadly accordion wars of Lesotho.

4. Ivanchuk Reviews His Game Against Carlsen, Ignores Air Raid Alert.

5. Jonathan Haidt Lunch with the FT.

6. Interview/podcast/YouTube with Thomas Uhm of Jane Street.  Crypto and NFTs too, some unique perspectives, in part a non-crazy person explaining the potential to the doubting Sallies.

Thursday assorted links

1. In Austin, Caplan and Razib Khan will comment on Hanania.  I am telling them to put it on YouTube.

2. Pushing Zambia to become a start-up hub?

3. Can software identify your chess-playing style?

4. Support for the child tax credit is waning (NYT).

5. Western Arkansas is offering 10k in Bitcoin and bike to relocate there.

6. Why are so many defectors from North Korea to South Korea women?

7. Bruno M. on Apichatpong Weerasethakul.

Emergent Ventures winners, seventeenth cohort

Caleb Watney and Alec Stapp, to found a think tank related to progress studies.

Joe Francis, a farmer in Wales, to write a book on the economic and historical import of slavery in the American republic.

Ananya Chadha, freshman at Stanford, general career development, her interests include neurology and electrical engineering.

Eric Xia, Brown University to develop word association software and for general career development.  He is “making a metaphysical sport” and working on word.golf.

Isaak Freeman, from southeast Austria, in a gap year after high school, general career development.

Davis Kedrosky, undergraduate at UC Berkeley, for economic history and general career development.  Home page here, Substack here.

Katherine Dee and Emmet Penney, for general career development including collaboration.  Among other topics, Katherine has worked on reimagining tech and Emmett has worked on promoting nuclear fusion.

Grant Gordon, to remedy hunger and nutrition problems in East Africa and also more broadly.

Sofia Sigal-Passeck, Yale University, “Co-founder and Chief Executive Officer of Uniphage, a biotechnology start-up which aims to eradicate bacterial diseases using the combined power of bacteriophages and artificial intelligence.”

Brian Potter, to improve productivity in construction, through both writing and practice.  Here is his Substack.

Daniel Liu, attending UCLA, to study computational biology and for general career development.

Molly Mielke, founder and CEO of Moth Minds, a new company to find talent and revolutionize philanthropy: “Moth Minds is building the foundation that enables anyone to start their own grants program based on finding work that gets them excited about the future.”

Here are previous Emergent Ventures winners.

What is the profile of leading development economists on the PhD job market?

From David McKenzie at the World Bank, here is one excerpt:

Data from big middle-income countries, and English-speaking Africa were most common, with no papers on the Middle East and North Africa, and very little study of the poorest places: In both samples, India, Brazil, and Colombia (and the U.S.!) were the most common countries studied, with a smattering of papers from East Asia, other South Asian countries, and Latin America, and one from Russia with nothing else on Eastern Europe and Central Asia. Of the World’s 25 poorest countries, only one (Mozambique) was the subject of study; of the five countries that contain half the World’s poor, there were papers on India and Bangladesh, but none on Nigeria, DRC or Ethiopia.

Here is another:

RCTs have far from overtaken development, difference-in-differences is the most popular identification method, yes, people still do IV, and no, no one does PSM on the job market: The pandemic may have reduced the ability of people to do some field experiments, but this year at least, only 20% of the top school sample, and only 6% of the World Bank sample were doing RCTs. More than one quarter in both cases were using difference-in-differences. RDD and IVs were used in about 10% of the papers each, and structural models were common in the World Bank sample (which has more trade and macro papers). None of the papers used propensity score matching.

The blog post is interesting throughout.  Via the excellent Samir Varma.

An update on the mask debate

I am long since tired of this debate, and I see that a lot of people are not joining it in the best of faith.  I can pass along a few updates, namely this study, with some critical commentary attached.  And here is more on the Bangladeshi mask RCT.  With more data transparency, it does not seem to be holding up very well.

That said, I am not sure that either calculation really matters.  Any good assessment of mask efficacy has to be radically intertemporal in nature, and I mean for the entirety of the pandemic.  “Not getting infected” now may well raise your chance of getting infected later on, and that spans for longer than any feasibly designed RCT.  And have you heard about the new “Nu” variant?  It may turn out not to matter, but it does remind us that the pandemic is not over yet.

As a simple first approximation, think of the real value of masks as “a) how many infections are delayed for how long, plus improvements in treatment in the meantime, plus b) how many infections are avoided altogether.”  Even a well-designed RCT is going to focus on a version of b), but only for a limited period of time.  The extant studies don’t at all consider “plus improvements in treatment in the meantime,” or when some of those protected by masks for say a year or two might nonetheless later catch Covid later yet.  So those RCTs, no matter what their results, are grabbing only one leg of the elephant.

To make matters more complicated yet, a “very small” efficacy for masks might (yes, might) translate into a much larger final effect, due to effective R (sometimes) being greater than 1.  So finding a very small effect for masks doesn’t mean masks are only slightly effective.  As the pandemic is ending, you might (again might) have had one less “pandemic cycle” than if you hadn’t tried masks at all.  You can think of masks as a kind of lottery ticket on “one big gain,” paying off only when the timing is such that the masks have helped you choke off another Covid wave.  Again, the RCT is not capable of estimating that probability or the magnitude of its effect.

Yet another part of my mental model of masks has evolved to be the following.  You have two sets of countries, countries that manage Covid well and countries that don’t, argue all you want who goes into which bin but that isn’t the point right now.

Now consider the countries that don’t manage Covid well.  They might wish to stretch out their epidemics over time, so that better treatments arrive, subject to economic constraints of course.  But the countries that manage Covid well probably want the poorly-managed countries to reach herd immunity sooner rather than later, if only to lower the ongoing risk of transmission from a poorly-managed country to a well-managed country.  And to lower the risk of those countries birthing new variants, just as southern Africa now seems to have birthed the Nu variant.

So we have two major points of view, represented by multiple countries, one wanting quicker resolution for the poorly managed countries but the other wanting slower resolution.  Does any study of masks take those variables into account?  No.  Nor is it easy to see how it could.

To be clear, I am not arguing masks don’t work, nor am I making any claims about how much masks may or may not protect you individually, or the people you interact with.  I am claiming that at the aggregate social level we are quite far from knowing how well masks work.

I say it is third doses we should be doubling down on, not masks.  To be clear, I am fine with wearing masks myself, I am used to it, and I dislike it but I don’t hate it.  On this issue, I am not one of those people translating his or her own snowflake-ism into some kind of biased policy view.

But the emerging science on third doses is much stronger, and most countries have been dropping the ball on that one.

Best non-fiction books of 2021

What an incredible year for non-fiction books!  But let me first start with two picks from 2020, buried under the avalanche of Covid news then, and missed because I was less mobile than usual.  These books are not only good enough to make this list, but in just about any year they are good enough to be the very best book of that year:

Edward Nelson, Milton Friedman and Economic Debate in the United States, 1932–1972, volumes one and two.

Alexander Mikaberidze, The Napoleonic Wars: A Global History.

Also noteworthy is Reviel Netz, Scale, Space and Canon in Ancient Literary Culture, which I hope to write more about.

Per usual, there is typically a short review behind each, though not quite always.  As for 2021 proper, here were my favorites, noting that I do not impose any quota system whatsoever.  (And yet this list is somehow more cosmopolitan than most such tallies…hmm…)  I don’t quite know how to put this, but this list is much better than the other “best books of the year” lists.  These are truly my picks, ranked roughly in the order I read them:

Jin Xu, Empire of Silver: A New Monetary History of China.

Cat Jarman, River Kings: A New History of the Vikings from Scandinavia to the Silk Roads.

Michela Wrong, Do Not Disturb: The Story of a Political Murder and an African Regime Gone Bad.

Ryan Bourne, Economics in One Virus: An Introduction to Economic Reasoning Through Covid-19.

Colin Bryar and Bill Carr, Working Backwards: Insights, Stories, and Secrets from Amazon.

Ivan Gibbons, Partition: How and Why Ireland Was Divided.

Serhii Plokhy, Nuclear Folly: A History of the Cuban Missile Crisis.

Alan Taylor, American Republics: A Continental History of the United States, 1783-1850.

William Deresiewicz, The Death of the Artist: How Creators are Struggling to Survive in the Age of Billionaires and Big Tech, brief discussion of it here.

Roderick Matthews, Peace, Poverty and Betrayal: A New History of British India.

Alejandro Ruiz, Carla Altesor, et.al., The Food of Oaxaca: Recipes and Stories from Mexico’s Culinary Capital.

Tomas Mandl, Modern Paraguay: South America’s Best Kept Secret.

Kara Walker, A Black Hole is Everything a Star Longs To Be.

Tony Saich, From Rebel to Ruler: One Hundred Years of the Chinese Communist Party.

Adeeb Khalid, Central Asia: A New History from the Imperial Conquests to the Present.

Richard Zenith, Pessoa: A Biography.

John B. Thompson, Book Wars: The Digital Revolution.

Scott Sumner, The Money Illusion: Market Monetarism, the Great Recession, and the Future of Monetary Policy.

Architectural Guide to Sub-Saharan Africa.

Joanne Limburg, Letters to My Weird Sisters: On Autism and Feminism.

McCartney, Paul. The Lyrics.  A remarkably high quality production, again showing McCartney’s skill as manager and entrepreneur.  Perhaps the biggest revelation is when Paul insists that if not for the Beatles he would have been an English teacher.  He also claims that he and not John was the big reader in The Beatles.  It is also striking, but not surprising, when explaining his lyrics how many times he mentions his mother, who passed away when Paul was fourteen.  There is a good David Hajdu NYT review here.

Bob Spitz, Led Zeppelin: The Biography.  They always end up being better than you think they possibly could be, and this is the best and most serious book about them.

gestalten, Beauty and the East: New Chinese Architecture.  Self-recommending…

Is there a “best book” of 2021?  The categories are hard to compare.  Maybe the seven volumes of Architectural Guide to Sub-Saharan Africa?  But is it fair they get seven volumes in this competition?  The McCartney?  (He took two volumes.)  The Pessoa biography?  Roderick Matthews on India?  So much to choose from!  And apologies to all those I have forgotten or neglected…

Read more!  And here is my favorite fiction of 2021 list.  And I will write an addendum to this list as we approach the very end of 2021.

Alternative Dosing

Close-up medical syringe with a vaccine.

Alternative dosing is finally getting some attention. This story in Nature recounts some of the recent arguments and evidence:

Two jabs that each contained only one-quarter of the standard dose of the Moderna COVID vaccine gave rise to long-lasting protective antibodies and virus-fighting T cells, according to tests in nearly three dozen people1. The results hint at the possibility of administering fractional doses to stretch limited vaccine supplies and accelerate the global immunization effort.

Since 2016, such a dose-reduction strategy has successfully vaccinated millions of people in Africa and South America against yellow fever2. But no similar approach has been tried in response to COVID-19, despite vaccine shortages in much of the global south.

“There’s a huge status quo bias, and it’s killing people,” says Alex Tabarrok, an economist at George Mason University in Fairfax, Virginia. “Had we done this starting in January, we could have vaccinated tens, perhaps hundreds, of millions more people.”

…Sarah Cobey, an infectious-disease researcher at the University of Chicago in Illinois and a co-author of a 5 July Nature Medicine commentary supporting dose ‘fractionation’, disagrees about the need for time-consuming data collection.

“We shouldn’t wait that long,” she says. “People are dying, and we have historical precedent for making very well-reasoned guesses that we think are going to save lives.”

…According to a modelling study published by Tabarrok and other economists, such an approach would reduce infections and COVID-linked deaths more than current policies.

Addendum: The reason for doing the modeling study is precisely to take into account variants like Delta. Our modeling suggests that even with efficacy significantly lower than that suggested by Figure 1 in our paper, alternative doses of more effective vaccines would still provide significant reductions in mortality, even when new variants dominate. The benefits derive from vaccinating more quickly.