Assorted links
1. Europe according to France, a map. There is more here.
2. 24 different English language accents (some have curse words)
3. Gramophone classical music picks for the year.
4. Markets in everything: credit card cosignatures, via Jodi Beggs.
What I don’t understand about Ireland
What does anyone keep his or her money, in any sizable amount, in an Irish bank when you can have a euro-denominated account in a German or English bank? Admittedly the interest rate on Irish deposits may be higher, but that has to be matched by a comparable rate of return on bank assets, which right now doesn't seem possible for Ireland. (One fear I have is simply that it isn't and that Irish banks are falling more deeply under.) No matter what bailout is promised, at the end of the day your "euro" might no longer be a true euro.
Yet once deposits flee Irish banks in large enough numbers, the Irish government has to suspend convertibility into the euro or in other words restrict capital movements, whether that is legal or not under EU law. And then suddenly Ireland has a new currency, whether they admit it or not.
There is also a contagion effect. Let's say that Portugal, Spain, Ireland, and Greece are the weak members of the eurozone. A pending bank run in any one of these countries could trigger a convertibility suspension in the others.
Do you think that all of these countries have a strong enough (or maybe I should say "weak enough"?) political economy to impose ongoing cuts in living standards on their voters, to pay back their debts in full? These countries not only have to do the hard work behind the payback, but they have to convince investors and depositors in advance that they will follow through consistently.
That's why I don't think the current configuration of the eurozone will last. A collapse would require only one weak link in the chain.
Right now I would not keep my money in any Irish bank, but presumably some of the people in Ireland remain loyal to their institutions. It's odd how the eurozone is premised on a cosmopolitan Europe, but right now it is hanging by the thread of some very provincial preferences.
*Red Plenty*
"No!" said the Chairman in triumph. "No subsidy!" This is America! Don't you see that the very fact that the hemburger [sic] kiosk is there means that somebody has worked out how to make a profit by selling the meal at fifteen cents. If the capitalist who owns the kiosk couldn't make a profit at that price, he wouldn't be doing it. That is the secret of everything we see here."
Here is one Amazon review of the book, Francis Spufford's latest:
This is a fantastic, innovative look at the economic policies of the USSR under Khrushchev. If my opening sentence sounds dull, please don't see it as a true representation of this book. Spufford's approach is to interweave extensive research with the imagination and invention of a novelist. The end result is a fantastic patchwork in which fictional characters rub shoulders with historical ones and stunning descriptive passages add lustre to what might have been dry, factual information.
It's one of the most stylish fictional experiments of the year, and yet it suddenly, and repeatedly, breaks into disquisitions about market socialism, Oskar Lange, the measurement of Soviet gdp, and Leonid Kantorovich.
Here is one Guardian review of the book. Here is a Telegraph review, also a rave. Here is more praise. Here is the Amazon UK listing. For a while Amazon US claimed the book would come out in March, now there is just this strange and useless listing.
I thank a loyal MR reader for the pointer.
Does money boost real output?
Here is one sentence to ponder:
The significance attributed to money in influencing output has fluctuated greatly as various aspects of VAR modeling have advanced.
It is instructive to read the first few paragraphs of that paper (and here), to get a sense of how murky the issues are. And that is looking at non-liquidity trap periods. If you want a more recent defense of the relevance of money, try this paper. Here is a more skeptical view. Either way, I defy you to come away convinced.
The evidence is much stronger that deflationary shocks are bad; see this Christina Romer and David Romer paper.
We do have theoretical grounds for believing that monetary expansions will be potent when there are lots of unemployed resources and when the demand for money has recently spiked up. But if we're relying on theory, theory doesn't tell us much about expected employment effects because we're back to Arnold Kling's point:
Pretty much everything in AS/AD is riding on the hypothesis that labor supply is highly elastic at the nominal wage and labor demand is reasonably elastic at the real wage.
This is another way of understanding why the Fed is afraid to inflate some more. The gain is uncertain, but the bureaucratic cost of coming out for higher inflation is pretty much for sure.
Mark Thoma's views on the asymmetry of monetary policy, across periods of falling and rising income, can be found here.
Overall, it is easier to break things than to put them back together again.
What Makes the US Health Care System So Expensive?
Here's a shout out to Austin Frakt and Aaron Carroll at The Incidental Economist for their blogging about health care.
In particular, Aaron Carroll's series on What Makes the US Health Care System so Expensive does a very good job of locating the sectors where the US health care system is more expensive than we would expect compared to other countries (it's less good at identifying why these sectors are expensive but we have to start somewhere.) The link is to the introduction to the series. Aaron's post on Red Herrings was especially good.
Austin has also put together a useful set of powerpoint slides on the US Health Care Crisis. He invites you to steal these for your classes or talks or just to read.
One reason why fiscal reform is difficult
Joblessness and the accompanying loss of health benefits drove an additional 3.7 million people into the Medicaid program last year, the largest single-year increase since the early days of the government insurance plan, according to an annual survey by the Kaiser Family Foundation.
Enrollment in the program, which provides comprehensive coverage to the low-income uninsured, grew by 8.2 percent from December 2008 to December 2009, the second-largest rate of increase in the 10 years that Kaiser has conducted the survey. There were 48.5 million people on Medicaid at the end of 2009, or about one of every six Americans.
The article is here. The dilemma is simple: variations in Medicaid coverage account for a lot of the variation in the health of state government finances. Yet if states cut back on Medicaid in some manner, there will be more people on the more expensive subsidized exchanges, come the full onset of the Obama health plan.
Strategic food attack at functions
Here is more on the optimal use of buffets, especially for Indian food:
At Sharadha’s wedding too I had managed to spot and exploit arbitrage opportunities. For example, I realized that people never stood in queues to get second helpings, and that I could peacefully get around the line by taking the plate from the hardly-crowded salad counter and then going to the main line looking like I was going for second helpings.
…And if you find yourself at a buffet which has lots of financial traders, I really pity you.
The previous link on the topic was here. For the pointer I thank Karthik Shashidar.
What is the incidence of “game”?
You know, "game," the use of signaling tactics to persuade, nudge, or trick a woman into treating you like a higher status male than otherwise would be the case.
Let's assume that game advocates are correct that, at current margins, "game" can yield the individual gamer higher returns without having to pay an offsetting price in terms of greater expense, less pleasant conquests, etc. and thus game is a net gain for the individual practitioner. Maybe not, but let's say.
Let's also say that any particular game tactic won't work on all women, even if you think that some form of game will succeed, if you know enough about the woman or have good enough intuition. In other words, you have to pick a strategy and aim at a sector but can't target all types of women at the same time. I don't think it's unfair to ask for that assumption back in return.
Why am I suddenly thinking about the tragedy of the commons and the Harberger corporate taxation model?
If there is no price mechanism to choke off the returns from game, the implied result is the crowding of men around each group of game-ready women. Over time, the average returns of game are competed down to…by the typical equalization assumption…the returns of non-game.
Which men end up better off? Ask: would you rather "buy" in a market where there is an equilibrating price, or in a market where there is no price but lots of crowding? Men with a relatively high tolerance of queuing should prefer the market without a price, namely the gaming scene. In the markets with prices, you can be pretty sure you get what you most prefer, that is by paying the price. (I'm not talking about prostitution, I'm talking about broader mating markets where you have to be something or give something to get something.) Non-gamers therefore dislike queuing, know what they want, and recognize the trade-offs in succeeding.
Oddly, gamers themselves might be better off if game "worked" by spending a lot of money buying women drinks (this seems not to be the case). It would then return to being a market with an equilibrating price, which is maybe where it is headed anyway.
If circumstances exogenously shift an extra man into "game," who loses? The other men playing game, who now have higher queuing costs. Who gains? The non-gaming men who pursue the women who have been abandoned by the new, marginal gamers.
There are comparable propositions about free roads and toll roads. Let's say you have a pay road and a free road, covering the same route. Usually the move toward a social optimum involves a tax on the free road. In other words, social norms against game benefit the practitioners of game by limiting crowding. In contrast, spreading publicity about the potency of game benefits the non-gaming men.
If gamers are disillusioned romantics, the women who are courted by sensitive romantics also lose when there is a shift of male effort into game. Those women now find there are fewer bids of truly romantic interest. Consistently romantic men, who do not grow disillusioned and shift into game, will gain through superior selection and more favorable terms of trade.
Thaler Nudges the Brits (and the Swedes?)
Guardian.co.uk: A "nudge unit" set up by David Cameron in the Cabinet Office is working on how to use behavioural economics and market signals to persuade citizens to behave in a more socially integrated way.
The unit, formally known as the Behavioural Insight Team, is being run by David Halpern, a former adviser in Tony Blair's strategy unit, and is taking advice from Richard Thaler, the Chicago professor generally recognised as popularising "nudge" theory – the idea that governments can design environments that make it easier for people to choose what is best for themselves and society.
Thaler is a good bet for the Nobel. Hat tip Martin Ryan at Geary.
Assorted links
1. How good is Twitter at estimating the strengths of earthquakes?
2. Robin Hanson.
3. Markets in everything: DUI scooters.
4. Markets in everything: a waste of good lingerie (safe for work, actually).
5. Michael Cannon's theory of how to limit Medicare expenditures: "Larger vouchers would mean greater demand for medical care. Yet each producer group's incentive to lobby for a higher growth rate would be much less than their incentive to lobby to increase the prices Medicare pays them today."
Department of Unintended Consequences?
Researchers at the Highway Loss Data Institute compared rates of collision insurance claims in four states – California, Louisiana, Minnesota and Washington – before and after they enacted texting bans. Crash rates rose in three of the states after bans were enacted. The Highway Loss group theorizes that drivers try to evade police by lowering their phones when texting, increasing the risk by taking their eyes even further from the road and for a longer time.
The link is here and no I don't know what the controls are and how they adjusted for a possible time trend.
*Wall Street II*
It was not a great movie but it was better than I had been expecting and I am glad to have seen it. Moral hazard was explained — well, and using that term – numerous times. The central role of leverage behind the crisis was stressed, as were the political economy elements. The movie was chock full of economics, to a remarkable degree, albeit in an unbalanced fashion, especially when it came to explaining "speculation." The film very well captured the feeling of sick dismay which unfolded with the events of the financial crisis. As an inside joke, they had a wonderful silent stand-in for Geithner. In this movie men don't seem to care about women very much, not even for sex. The Charlie Sheen cameo was my favorite moment, as it rewrites one's understanding of the first Wall Street movie and raises broader questions about the motivations of "good" people. The female lead was flat; I suspect this was poor execution although a Straussian reading will attribute that to a brilliant savaging of her character. I wished for a different ending. A comparison with the parent film shows that New York has become less interesting.
Further update on Irish austerity
The bail-out costs will lift the fiscal deficit from the planned 11.75 per cent of gross domestic product in 2010 to 32 per cent.
The FT article is here. Is it really Irish "austerity" that the market has been punishing?
Is there any economic basis to homophobia?
William Alexander Johnson asks:
I always make sure to read your blog, and a while ago a Marginal-Revolution-type question popped into my mind:
Is homophobia the only form of hatred that doesn't have an economic component?
As far as I can tell, most hatreds between different peoples are caused to a great extent by economic conflicts. Whites vs. blacks in the U.S., Europeans vs. natives in former European colonies, Christianity vs. Judaism vs. Islam, locals vs. immigrants in countries across the world, animosity between different castes in India, and even killings of supposed witches in tribal societies all have very important economic dimensions.
But homophobia seems to have absolutely no economic component. I've heard that homosexuals are on average a little more economically successful than heterosexuals, but I very seriously doubt that that has the slightest bit to do with anything.
I can't think of any other form of hatred so divorced from "rational" conflict, so to speak.
…What do you think?
Bryan Caplan predicts greater tolerance in the future and Andrew Sullivan sees positive trends. I do favor both gay marriage and other advances in gay rights, but when I scan the evidence, I am a bit pessimistic. The positive short-run momentum is clear, but what about the longer run? I see the following:
1. Prejudice and bullying against gay individuals is often brutal and unreasonable and it is applied where there is no evidence of harm from gays. The prejudice is often strongest among teenagers and young males, and it weakens somewhat with age and socialization.
2. Strong prejudices against gay men and women are found in every culture I know of, past or present. And yet in many cases homosexuality "limits the competition," so to speak. This potential gain finds little appreciation.
3. There is a common and sometimes strong "disgust reaction," especially to gay men.
4. We learn from John Boswell that high levels of gay tolerance, in antiquity, were followed by a counter-reaction and higher levels of prejudice.
5. Religion, conservative morals, and sexual traditionalism make periodic comebacks.
Looking at the overall pattern, I wonder whether many individuals have a natural, innate proclivity to dislike gay men and women and to feel discomfort with the entire idea of homosexuality, bisexuality too of course. Those preferences are not universal and they can be mediated by positive social forces, but left to their own devices, they will periodically reemerge in strength.
The Economic Consequences of the Peace
Spiegel Online: Germany will make its last reparations payment for World War I on Oct. 3, settling its outstanding debt from the 1919 Versailles Treaty and quietly closing the final chapter of the conflict that shaped the 20th century.
…in 1953, West Germany agreed at an international conference in London to service its international bond obligations from before World War II. In the years that followed it repaid the principal on the bonds, which had been issued to private and institutional investors in countries including the United States.
Under the terms of the London accord, Germany was allowed to wait until it unified before paying some €125 million in outstanding interest that had accrued on its foreign debt in the years 1945 to 1952. After the Berlin Wall fell and West and East Germany united in 1990, the country dutifully paid that interest off in annual instalments, the last of which comes due on Oct. 3.
It is surprising that Germans are not more Keynesian.