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Sunday assorted links

1. Money from Putin and trouble in Austria.

2. Less social discounting from autistics.

3. Jeff Koons is underrated (NYT).

4. “Soil Instead Of Ashes: Human Composting Is About To Become Legal In Washington State.

5. Anti-inflation dubplate.

6. Newark schools have in fact turned around (The Economist, and I’d like to see a separate piece on whether Mark Zuckerberg deserves any credit for this.)

Dominick Armentano emails me about Standard Oil

Tyler,

Just watched your recent interesting  exchange with Professor Wu on whether the Standard Oil divestiture made public policy sense.

Wu asserted that the decision was good public policy. You said you were not so sure since  the evidence (on competition and consumer welfare) prior to divestiture may have been ambiguous. Wu had a near heart attack at that suggestion which showed me, of course, that he has never read the case, has never read the trial record (it’s 11,000 pages long and the State of Connecticut library in Hartford actually had a copy when I was researching this case back in 1970) and has never read any economist (such as myself) that has done  some of that work so that professors such as Wu can be marginally smarter in policy debates.

This is one of the most misunderstood cases in antitrust history. (Even Bork, who gets much of the revisionist case history correct, totally flinches on this case; he does nearly nothing with it.)

The first misunderstanding in almost all of the law texts is that this is the first “rule of reason”  antitrust case. That implies that the SC must have sifted through all of the conflicting facts and arguments presented at court and determined that Standard had acted “unreasonably.”  Totally False.  A modified rule of reason approach was articulated in the case by Justice White in 1911 but, of course, was never applied to the specifics in Standard.

As any antitrust lawyer can tell you this is a job for a lower court anyway, not for the SC; but this case was never remanded. The SC simply decided that the many mergers by Standard prior to 1890 constituted an attempt to monopolize in violation of the Sherman Act and, notice, divestiture follows logically from that reasoning. But whether Standard ever “restrained trade” (as we now understand the meaning of that phrase, i.e. able to reduce industry output  and raise industry price) was NEVER determined. Thus whether Standard missallocated resources, charged monopoly prices, repressed innovation, etc…was never decided by the SC or any other court.

Which leaves totally open the question of what was actually going on in the oil industry between say 1880 and 1907 (aside from the many mergers). I determined that this industry (crude oil, transportation, refining, marketing was all very small ( this is pre-gasoline after all); that there were few if any legal barriers to entry and that business organizations entered and left with some frequency, typical of a young and innovative industry; that Standard, despite mergers, always had many rivals in refining (Texaco, Pure Oil,  Associated Oil and Gas, Sun Oil, Gulf and many many others) and, of course, there were hundreds of firms in crude oil production and marketing which were never “monopolized”; that  costs and prices decreased throughout the period of alleged monopolization (even Ida Tarbell admits this. Indeed I got much of my cost and price information from her “History of the Standard Oil Company”; that Standard’s market share decreased in the 10 year period prior to the antitrust suit (1907); and that, as John McGee argued long ago, that Standard probably did not engage in predatory pricing.  There is much much more to this story and I tell a good share of that in “Antitrust & Monopoly.”

Perhaps Wu can make the case that the divestiture in 1911 produced a better result (in terms of all of the things that economists measure) than what would have happened if nothing dramatic had been done. That’s counter-factual so good luck with that!! All I know is that his knowledge of the actual history of the oil industry is quite stunning and I fear for the life of his more curious students.

Dom.

As I said in the Wu debate itself, I do not know enough about this case and I am agnostic on the question.  Still, there is a perspective you don’t usually hear, and so I am passing it along.

Inegalitarian restaurants

Or maybe you’re a senior staffer for Steve Scalise, the second-ranking Republican in the House. The aide usually pings his usual server for one of his usual perches: table 10 in the main dining room. It’s the corner booth with a privacy curtain—the “rock-star table,” ever since Bono sat there. Only tonight he’d prefer a booth in the bar area. Trouble is it’s packed.

Not to worry. “A maître d’ always has a table in his back pocket,” Arnaud says. He adds the Hill staffer to the reservation system, and a bar booth with a reserved placard is his.

For these diners and the other VIPs on the books this evening—a congressman from Kentucky, a former media exec, a concierge from the W Hotel, a smattering of cherished regulars—the restaurant is extra-accommodating. Its maître d’s spot their special customers instantly, greet them by name, and immediately whisk them to their tables. Good cop, good cop…

First, the hierarchy. Because this is Washington, many restaurants naturally have a pecking order for their top clientele. All VIPs of Le Diplomate, the French brasserie in Logan Circle, are dubbed “PPX”—personnes particulièrement extraordinaires—and tracked in real time on a kitchen whiteboard as they dine. But some, such as a neighborhood regular, are classified as “TTA,” for Try to Accommodate. Others are “MA,” for Must Accommodate, including Jill Biden; Gérard Araud, the outgoing French ambassador; and Jim Abdo, the developer who basically rebuilt 14th Street. An MA commands a table, stat.

At Rare Steakhouse in downtown DC, former managing director Justin Abad categorized semiregular VIPs as “soigné,” French for “handled with care,” and those who came in three to five times a week or held multiple functions at the restaurant throughout the year as “super soigné.” The lower tier would often be treated to a complimentary Prosecco, while those handled with extra care—select media figures and lawyers, for instance—might be given a free shellfish platter on occasion.

Here is much more by Jessica Sidman.  Have you ever wondered why at some places, and no I do not mean the old El Bulli, it is so hard to get a table at 7 p.m. on a Saturday night no matter when you try asking?  Those tables are being rationed by status, or if you are a very regular (and lucrative) customer of some kind.

And yet almost everyone still seems to think that restaurants are super-cool, correctly or not.

Tuesday assorted links

1. Russ Roberts video on the distribution of the gains from economic growth.  Essay version here.

2. Josh Barro on the incidence of tariffs on Chinese intermediate products.

3. John Cochrane on Free Solo, progress in rock climbing, and economic growth.

4. My *Big Business* podcast with James Pethokoukis.

5. Will California deregulate roadkill consumption?

6. MIE: A Theory of Justice: The Musical.

7. Caravana de mujeres (article in English, however).

Who loses most from the U.S.-China trade war?

You are hearing claims, hints, implications, or outright statements that the full burden of the trade war is falling on American consumers.  (Maybe some of the commentators are too wrapped up in the “Trump’s action have no merits whatsoever” game?)  I strongly believe that is wrong, as outlined in my latest Bloomberg column.  Here is one bit:

…there are well-done studies showing that the recent tariffs have translated into higher prices for U.S. consumers. I am not contesting that research. The question is whether those studies give sufficient weight to all relevant variables for the longer run.

To see why the full picture is more complicated, let’s say the U.S. slaps tariffs on the industrial inputs (whether materials or labor) it is buying from China. It is easy to see the immediate chain of higher costs for the U.S. businesses translating into higher prices for U.S. consumers, and that is what the afore-mentioned studies are picking up. But keep in mind China won’t be supplying those inputs forever, especially if the tariffs remain. Within a few years, a country such as Vietnam will provide the same products, perhaps at cheaper prices, because Vietnam has lower wages. So the costs to U.S. consumers are temporary, but the lost business in China will be permanent. Furthermore, the medium-term adjustment will have the effect of making China’s main competitors better exporters.

And:

China has an industrial policy whose goal is to be competitive in these [branded goods] and other areas. Tariffs will limit profits for these companies and prevent Chinese products from achieving full economies of scale. So this preemptive tariff strike will hurt the Chinese economy in the future, even if it doesn’t yet show up in the numbers.

Most generally:

In my numerous visits to China, I’ve found that the Chinese think of themselves as much more vulnerable than Americans to a trade war. I think they are basically correct, mostly because China is a much poorer country with more fragile political institutions.

I should note that I am not trying to defend Trump in this column, rather we need to get the economics right if we are to understand what is going on and why America can exert any pressure at all.  On Twitter, Christopher Balding is one who is getting these matters right.

Returning to the bigger picture, to the extent you wish to criticize Trump’s policies, focus on what China may do as a result of its vulnerability, not America’s supposed lack of bargaining power in the struggle.

Monday assorted links

1. List and ranking of economics blogs.

2. Dating in South Korea.

3. “Alex is a 43-year-old San Franciscan who works in the financial sector. He also eagerly eats uneaten and untouched leftover food off of plates if he spots it out in the open at a public dining establishment, even if it’s off a stranger’s plate…I’m very much a Libertarian and I kind of let people do whatever they want.”  Link here, hilarious throughout.

4. A short take on progress in Bangladesh.

5. Multinational offshoring was behind much of employment deindustrialization.

6. Pay transparency in Canada led to lower academic salaries.  And a smaller gender gap in salaries.

Thursday assorted links

1. Left-wing critique of the Green New Deal.

2. TV show about North Korean defector beauties (NYT, recommended).

3. China/Moldova fact of the day: “World alcohol consumption on the rise as China’s thirst grows. Chinese will surpass the US for per capita intake by 2030, research shows, but Moldova claims top spot for now.”

4. Is Belt and Road a big, dysfunctional mistake?

5. What happened to Indian demonetization?

Wednesday assorted links

1. How much depression is there in poor countries?

2. “Indeed, both studies revealed that while social liberals were overall more sympathetic to poor people than social conservatives, reading about White privilege decreased their sympathy for a poor White (vs. Black) person. Moreover, these shifts in sympathy were associated with greater punishment/blame and fewer external attributions for a poor White person’s plight. We conclude that, among social liberals, White privilege lessons may increase beliefs that poor White people have failed to take advantage of their racial privilege—leading to negative social evaluations.”  Link here.

3. Noah Carl has been sacked.  And more information.

4. “What compelled you to put a waterfall of this size inside an airport?” (Singapore)

5. A review of neuroeconomic gameplay in psychiatric disorders.

6. Hacking insulin pump regulation.

Tuesday assorted links

1. Shade.

2. Bryan Caplan reviews *Big Business: A Love Letter to an American Anti-Hero*.

3. Why did the great cathedrals take so long to build?

4. Ross Douthat on Trump’s Fed pick (NYT).  Endorses the idea of Ramesh Ponnuru, Karl Smith, Scott Sumner or David Beckworth.

5. “Contrary to popular accounts, this study finds that cross-national diffusion [of Google searches] is surprisingly rare—and seldom U.S. led—but occurs through a multichannel network with many different centers.”  And here is a picture.

Does the speed of production matter?

Patrick Collison has pointed out that past production often was very speedy, for instance the Empire State Building went up in 410 days, start to finish.  These days, it took the government almost fifty years to open the 2nd Ave. subway line in NYC, with a lot of the speedy production being relegated to China.

But how important is speedy production?  More generally, how should we think of the speed of production as a variable of import?

I can think of a few reasons why the speed of production might matter:

1. Because if you don’t act now the status quo is terrible.  (Often a factor in China, especially in earlier decades, or in earlier American history.  They really did have to put up those bridges at Remagen very quickly.)

2. Nominal interest rates are high.  You can think of the nominal rate as a rough measure of the opportunity cost of locked-up funds/resources.

3. Speed is a signal of urgency, and other positive qualities, but speed per se is not actually so valuable.  Speedy institutions and societies, nonetheless, might be better at setting priorities and accepting trade-offs, big gains above and beyond the value of speed.  Who wants a dawdler!?  And perhaps the speedy are especially good at signaling, a valuable skill.

4. Patrick himself suggests: “speed matters because frontier people like it and will go to the places where speed is possible. It maximizes their comparative advantage.  If your field ceases to support speed, you’ll lose frontier people and stagnate.”  [In turn you might wonder if speed today simply has shifted into other areas, say payment companies and the like, and out of construction, rather than speed having declined per se?  Amazon will try to shift to one day delivery, car production is speedier, Netflix gets you a movie more quickly, and so on.]

5. In a speedier world, recontracting happens more frequently.  Quantity-based resource logjams are cleared up more quickly, and the more rapid contracting sends off price signals, to the general benefit of the market, on a more regular basis, leading to generally superior resource allocation for Hayekian reasons.  For these reasons, perhaps the social value of speed is higher than the private value, thus implying we are underinvesting in production speed?  There are positive external benefits to pushing more liquidity into those spot markets!

So how much should we be worried about the (possible) decline of speedy production?  Should currently low nominal interest rates be taken to mean this simply isn’t much of a problem?

Your thoughts would be most welcome.

Do Experts Listen to Other Experts?

Not so much:

Organizations in science and elsewhere often rely on committees of experts to make important decisions, such as evaluating early-stage projects and ideas. However, very little is known about how experts influence each others’ opinions, and how that influence affects final evaluations. Here, we use a field experiment in scientific peer review to examine experts’ susceptibility to the opinions of others. We recruited 277 faculty members at seven US medical schools to evaluate 47 early stage research proposals in biomedicine. In our experiment, evaluators: (1) completed independent reviews of research ideas, (2) received (artificial) scores attributed to anonymous “other reviewers” from the same or a different discipline, and (3) decided whether to update their initial scores. Evaluators did not meet in person and were not otherwise aware of each other. We find that, even in a completely anonymous setting and controlling for a range of career factors, women updated their scores 13% more often than men, while very highly cited “superstar” reviewers updated 24% less often than others. Women in male-dominated subfields were particularly likely to update, updating 8% more for every 10% decrease in subfield representation. Very low scores were particularly “sticky” and seldom updated upward, suggesting a possible source of conservatism in evaluation. These systematic differences in how world-class experts respond to external opinions can lead to substantial gender and status disparities in whose opinion ultimately matters in collective expert judgment.

That is from a new working paper by Misha Teplitskiy, Hardeep Ranu, Gary Gray, Michael Menietti, Eva Guinan and Karim R. Lakhani.  For the pointer I thank the excellent Kevin Lewis.