If I believed in Austro-Chinese business cycle theory
Most of China's growth this year has been unsustainable, driven by stimulus. China's money supply has risen 29% in the past year. At the government's behest, banks have increased their lending by nearly $1.4 trillion, or 32%, during that time.
That flood of borrowed cash has been channeled into new infrastructure and production capacity. These investments will account for up to half of China's gross domestic product this year, according to some estimates.
A key question is whether China needs all of this investment. Analysts at the London hedge fund Pivot Capital Management say that China already has enough idle steel-production capacity, for example, to match the steel output of Japan and South Korea combined.
Meanwhile, the ratio of investment to GDP is rising, suggesting China's investment is less and less efficient, says Edward Chancellor at Boston asset-management firm GMO.
The combination of soaring investment and dwindling returns was seen in Japan in its asset bubbles in the 1980s and in the "Asian Tigers" just before their crises in the late 1990s, he says.
The link is here. Does anyone know how to say "excess capacity" in Chinese? Even more importantly, can you get it past the typepad spam blocker?
What does a free service charge signal?
Eduardo Diaz, a loyal MR reader, asks:
A question for you…have you ever compared in the context of "trade repairs" (i.e. garage door repair, plumbing, etc.) the pros and cons of companies that offer free estimates or evaluations vs. companies that charge an inspection charge?
My intuition would make me hypothesize that: Free estimate company would have a stronger incentive to be nice to get the business. They might "sugar coat", if they are unethical and think they can get away with holding you up later. In this model, the customer might feel "obligated" to reciprocate for the courtesy of the free estimate by giving this provider the business. Company that charges for the inspection would have an incentive to be a little more straight with you, this tendency increasing as the inspection charge comes close to cover the cost to the company of the inspection. Incentive to be nice is less in this case. Perhaps, the repair techs with "less people/sales skills" might gravitate to this business model. or perhaps this model attracts more techs that live far away or don't have a "critical mass" of business in a particular area. These trade repair industries are very competitive due to low barriers to entry and difficulty to collude, so I think competition probably drives the cost structure for those companies to a pretty similar point. Thus, I'd expect my total cost with a free inspection company vs. an inspection-charge company should be the same, assuming I'm properly informed by reading up on-line reviews, getting several quotes, etc. in other words, the no charge companies will need to recoup the cost of all the inspections that don't result in profitable repair work.
If you think you are likely to proceed with the repair work (rather than junk the thing, try to fix it yourself, decide you're in fact a garage door hypochondriac, etc.), you might be more likely to pay the upfront fee for the estimate. Of course the company knows you will behave this way. If they have any ability to price discriminate, for the service itself they will charge you a higher price ex post. You in turn will shy away from this equilibrium. In essence paying the upfront service charge reveals something about your type, namely that you are eager for repairs. We're then more likely to see free estimates as the dominant strategy. Some subset of firms will charge for estimates if they can appeal to customers who in essence want to face price discrimination to ensure higher service quality from the wealthier firms with more valuable long-term reputational franchises.
Alternatively, assume that if you have to pay to learn the price, the said price information is valuable. Price information is valuable when the market in question isn't so competitive and when search costs are high. Producers are signaling that their markets are not so competitive when they charge for service estimates and many producers will shy away from letting on about that to their customers.
Sometimes you can flip this kind of argument. You, as a customer, might assume that a firm which charged for estimates had especially informed customers. You might hope to masquerade as another such informed customer and thus patronize such a firm, hoping that it will treat you well because it is used to dealing with informed buyers. It is an open question whether this equilibrium holds up.
You can spin many other scenarios, those are just some ideas that came to mind.
NASA FAQ 2012
NASA scientists are frequently being asked questions concerning 2012 and for this reason they have created a
Q: Is there a planet or brown dwarf called Nibiru or Planet X or Eris that is approaching the Earth and threatening our planet with widespread destruction?
A: Nibiru and other stories about wayward planets are an Internet hoax. There is no factual basis for these claims. If Nibiru or Planet X were real and headed for an encounter with the Earth in 2012, astronomers would have been tracking it for at least the past decade, and it would be visible by now to the naked eye. Obviously, it does not exist. Eris is real, but it is a dwarf planet similar to Pluto that will remain in the outer solar system; the closest it can come to Earth is about 4 billion miles.
Sigh…. I too fear for our planet.
Countercyclical “asset” of the day — burglary watch
With a lot more unemployed people, a lot more people are staying home, and they see more in their neighborhood," said Sgt. Thomas Lasater, who supervises the burglary unit of the police department in St. Louis County, Mo., where authorities recorded a whopping 35 percent drop in burglaries during the first six months of 2009.
The falling price of raw materials — which had been producing copper and other thefts — may be another reason for the change in trend. Here is the story and I thank Daniel Lippman for the pointer.
Assorted links
Unemployment Breakdown
The NYTimes has a nice interactive graphic on unemployment rates and changes over time by demographic characteristic. I am in the category–white men ages 25-44 with a college degree– with almost the very lowest unemployment rate (3.9%). Just to compare, as pointed out in the comments, black males 15-24 without a high school degree have an unemployment rate of 48.5%. Check it out.
Hat tip to FlowingData.
Measuring the movie critics
If you want to get a sense of the zeitgeist but can only read one review, you might prefer Rene Rodriguez, whose low standard deviation from the mean review score makes him very nearly a living critical average. If you are interested in an alternative perspective, Mick LaSalle's high standard deviation places him further from the critical pack than any of these peers. Reviews from both Michael Wilmington and Marc Savlov are so regularly and respectively positive and negative that they should perhaps be taken with a grain of salt.
The source article, which contains much more information, is here. You'll find a visual representation of the critics's stances here. Hat tip goes to Eric Barker.
If you're wondering, I don't have a "favorite movie critic." I judge movies by the preview, the director, and by mentally aggregating the first five reviews I happen to read. This works well for me. If I had to go by a single source, by far it would be Variety magazine, which offers separate assessments of a movie's goodness and of its popularity with various demographics, a luxury which non-insider publications do not always have.
China claim of the day
If China remains culturally closed, the Chinese Century will never come to pass. Instead, the United States–a country that has struggled with race and racism for centuries, and in the process has become more culturally open and resilient–will dominate this century as it did the last.
That's from Reihan Salaam, who discusses how far the problem of Asian racism is from being solved.
Berlin memories
I first visited Berlin in 1985, while traveling with Randall Kroszner. We drove to West Berlin by car and we were terrified for the few hours we were underway in East Germany. Randy did not drive over the speed limit once. I was hardly a communist sympathizer but still I was unprepared for the day trip to East Berlin. I saw soldiers goose-stepping down one of the main streets. In the stores old ladies yelled and swung their brooms at me. Many buildings still had bullet marks or bomb damage from World War II. In a restaurant we ate a rubber Wiener Schnitzel and shared a table with an East German family; they did not have enough trust in their government to speak a word to us. I was unable to spend my mandatory thirty-mark conversion on anything useful; I carried back some Stendahl and Goethe but didn't want the Lenin. This was in the capital city in the showcase of the communist world.
My biggest impression was simply that I had never seen evil before.
In the summer of 1990 I stayed in a dorm in East Berlin. Everyone seemed normal. Cute girls smiled. Yet there were few signs of modern German life as a Westerner might understand it; it was as if I had stepped into an alternative science fiction universe. The Vietnamese ran the street markets and Russian still mattered.
In 1999 I heard an emotional performance of Fidelio there and most of the audience cried.
I like spending time in Berlin. But I am never sure I like Berlin itself, West or East. Berlin is Germany being imperial. Berlin is Germany looking toward the east. Today Berlin is Germany pretending it is normal, while not yet having a new identity. Here is Kurt Tucholsky (in German) on Berlin. Here is a silly quotation about Berlin:
“Berlin combines the culture of New York, the traffic system of Tokyo, the nature of Seattle, and the historical treasures of, well, Berlin.”
Here is the Berlin Sony Center. Here is the Reichstag. Here is the Jewish Museum. Here is Knut, from the Berlin Zoo.
Assorted links
1. Photos from inside a Colombian prison.
2. How to increase altruism in toddlers?
3. Soviet mathematics as pure status competition.
4. How people count money, across culture (video).
5. Real vs. placebo coffee: people don't know if it's decaf.
High-speed rail fact of the day
American Intercity rail service is slower today than it was in the 1940s.
Here is the full article, by train expert Mark Reutter. It is a good look at some of the obstacles facing a successful high-speed rail program.
How short a time horizon is needed to motivate catch-up growth?
A few centuries ago, the ratio between the per capita income of the richest country and poorest country was maybe five to one. Today it is maybe one hundred to one.
The classic example of economic catch-up is given by East Asia in the mid-twentieth century, starting with Japan. In those days it was possible to obtain near-parity with the West in about thirty to thirty-five years. In other words, as a young man you could see near-parity before you retired and you could see near-parity for your grandchildren. You could see your children making it halfway there, even before they are entering the workforce.
What if, in the future, for the remaining poor countries, the West (and East Asia) is so rich that catch-up takes seventy years? One hundred years? Will any poor country be bothered? Won't it all seem too far off to be worth the trouble? (Catch-up growth takes lots of hard work and savings and sacrifices of previous social norms.) Or do you believe in a technology-transfer Solow model where the maximum possible rate of catch-up growth keeps on growing? One hundred years from now, will it be plausible to imagine catch-up growth of twenty or thirty percent a year?
What’s actually in the health care bill
Here's a new blog devoted to that topic.
*The Art of Not Being Governed*
The subtitle is An Anarchist History of Upland Southeast Asia and the author is James C. Scott of Yale University. Here is a summary from the Preface:
…I argue that the [Southeast Asian] hill peoples are best understood as runaway, fugitive, maroon communities who have, over the course of two millennia, been fleeing the oppressions of state-making projects in the valleys — slavery, conscription taxes, corvée labor, epidemics, and warfare. Most of the areas in which they reside may be aptly called shatter zones or zones of refuge.
Virtually everything about these people's livelihoods, social organizations, ideologies, and (more controversially) even their largely oral cultures, can be read as strategic positionings designed to keep the state at arm's length. Their physical dispersion in rugged terrain, their mobility, their cropping practices, their kinship structure, their pliable ethnic identities, and their devotion to prophetic, millenarian leaders effectively serve to avoid incorporations into states and to prevent states from springing up among them. The particular state that most of them have been evading has been the precocious Han-Chinese state.
Highly recommended, this is a book Gordon Tullock would love. So far it has received surprisingly little publicity but it strikes me as essential reading about Afghanistan as well. Here is a much earlier Crooked Timber post on Scott.
Assorted links
1. The vote to defund political science: how it went.
2. Jason Kottke doesn't read books anymore.
3. "Food rewards obsessiveness," the best eater in the United States. The full article is gated (the link offers only an excerpt), so buy the 9 November New Yorker. I don't usually link to gated material of this kind, but this was one of the three or four best magazine pieces I'll read in a year.
4. Why Buffett bought that railroad.
5. Weird stuff McDonald's sells around the world. In the Philippines it is "spaghetti soaked in sugar."
6. Fruitless endeavors, or not?: translating works of literature into games of chess against each other, using a computer program.
7. Were the Neanderthals just unlucky?
8. Françoise Sagan: an appreciation.