Request for requests
Yes, it's that time again. Please leave your requests for future coverage in the comments…
The culture that is Japan, markets in everything
There is much more at the link, including more photos, and I thank Michael Mullen for the pointer.
Assorted links
Advertising markets in everything
Goldman Sachs Group Inc., winning its first job managing a share sale by an Indian state-owned company, may earn next to nothing for the privilege.
The most profitable securities firm in Wall Street history tied for the lowest bid among 17 banks vying to manage the $1.8 billion offer by Power Grid Corporation of India Ltd., three people with knowledge of the matter said. Goldman Sachs and SBI Capital Markets Ltd. said they’d do the work for a fee equal to 0.00000001 percent of the sale proceeds. That means the firms stand to reap about 2 rupees (4 cents) each on the deal.
The full story is here and I thank Mehul Kamdar for the pointer. There were other low bidders, including JP Morgan. Why bid four cents I wonder, why not bid one cent?
Here is a related page, from what is propitiously called the Department of Disinvestment.
Bruce Cumings and what he deserves
Many of you are objecting to my post on his book, either in the form of comments or emails. You are objecting to his ideology and objecting that he does not denounce the North Korean regime with sufficient fervor and with sufficient recognition of its true awfulness, though he does denounce it, using the word "reprehensible."
On these points I (mostly) agree with you, the critics. Yet it is still a good book and it should open many people's eyes to the history of the Korean War and the not always pretty American role in that war. I haven't seen good comments or reviews finding fault with the book itself (but if I do I will pass them on). The book, by the way, does not allege that South Korea started the war.
Keep in mind how many history or foreign policy books or essays are written by people who are essentially toadies to power or apologists for the U.S. government, or for some other foreign regime. It is expected that we accept those problematic inclinations and affiliations without comment or condemnation. In contrast to many of the works by establishment historians, Cumings is a breath of fresh air.
Overall I seek to narrow rather than widen the following category: "cannot be praised without accompanying symbolic denunciation." If it turns out that, in the process, Cumings reaps more relative status than he deserves (and I am not very influential in shaping the reputations of historians), I'm not especially troubled by that.
In fact maybe I'm happy to see you squirm a bit.
One of my major purposes in writing this blog is to nudge people away from judging political issues, or for that matter books, by asking which groups or individuals rise or fall in relative status.
Wyclef Jean for President of Haiti?
Here is one response:
A sad day for Haiti. No experience. No plan. No education. Can’t speak the language let alone proper English plus a history of not being able manage his own personal affairs based on foreclosures, IRS tax liens and his nonprofit scandal.
Here is another:
Wyclef Jean owes the IRS 2.1 million dollars, had his house sold at auction and stole money from his own Haiti ‘charity’.
Those points would appear to be well-taken, but as an economist so often does, I would rephrase the question in terms of "how much" rather than "whether." What is the probability that the "added media scrutiny and international attention" effect will create benefits which outweigh his other deficiencies for the job? I say about ten percent.
Is there a genetic component to varying degrees of cooperativeness?
I have thought about this question and now I see a new paper (ungated here) on the topic:
Genes and culture are often thought of as opposite ends of the nature–nurture spectrum, but here we examine possible interactions. Genetic association studies suggest that variation within the genes of central neurotransmitter systems, particularly the serotonin (5-HTTLPR, MAOA-uVNTR) and opioid (OPRM1 A118G), are associated with individual differences in social sensitivity, which reflects the degree of emotional responsivity to social events and experiences. Here, we review recent work that has demonstrated a robust cross-national correlation between the relative frequency of variants in these genes and the relative degree of individualism–collectivism in each population, suggesting that collectivism may have developed and persisted in populations with a high proportion of putative social sensitivity alleles because it was more compatible with such groups. Consistent with this notion, there was a correlation between the relative proportion of these alleles and lifetime prevalence of major depression across nations. The relationship between allele frequency and depression was partially mediated by individualism–collectivism, suggesting that reduced levels of depression in populations with a high proportion of social sensitivity alleles is due to greater collectivism. These results indicate that genetic variation may interact with ecological and social factors to influence psychocultural differences.
Still, I can't see the evidence. I don't see the case for causation. Let's say something about a group's serotonin level made it more susceptible to social stress: couldn't that lead to either greater individualism or greater collectivism? Is collectivism so calming and are social institutions so functional so as to respond to how stressed we feel from social interactions? If I were a very stressed out person (I'm not), wouldn't I prefer to live in or construct the social institutions of Sweden, which in this context counts as individualistic?
You might respond that the evolving alleles should be linked to earlier Swedish society and not Sweden today. But then one needs to measure collectivism vs. individualism at that earlier point in time. I wouldn't be surprised if China in the tenth century were "more individualistic" than Sweden in the age of the Vikings, and so on.
(By the way, Is "individualism vs. collectivism" the right spectrum? We individualistic Americans seem especially apt at being trained to kill people and fire when ordered. We also seem especially patriotic.)
If you pull out the strangely-placed Colombia from Figure 1 in the paper, it's basically a Europeans vs. Asians effect driving both the genetic contrasts and the collectivism vs. individualism contrasts. We're left with two quite general contrasts and no theory connecting the two or much of a good reason to think they should be connected.
Don't we just have two data points here — "Asia" and "Europe" — and the split of the data into countries is a phony way to boost apparent statistical significance?
It's a broader question what effects higher serotonin levels have. I've tried to read a few papers on this topic and I've seen high serotonin levels correlated with both anxiety and calm. To be sure, this may reflect the inability of this non-specialist to see through to the best and best understood results, but still the relevance of serotonin to human behavior hardly seems like an open and shut question. I'd sooner suggest that right now we don't understand serotonin very well, at least not as it shapes broader social interactions.
I thank RR for the relevant pointer.
Christina Romer to step down
And Peter Diamond won't be confirmed for the Fed. Mark Thoma has the scoop. Here is one commentary, which I cannot vouch for; it concerns a potential clash with Summers.
“Doubt”? — how about confusion or impenetrability?
Here is a fun article about two macroeconomic forecasters. I chuckled at this part:
Showing not even a hint of doubt, Mr. Hatzius said, “The prospect of substantial inflation seems very remote, but the prospect for deflation is far from remote. A double dip is certainly possible but not likely.”
China observation of the day
Insofar as [some housing] prices soared 68 period in one year, 60 percent decline doesn’t sound like much of a worst-case scenario.
That's from Matt Yglesias.
Assorted links
1. Someone from London complains about the price system; some prices are high.
2. Further evidence on the German recovery.
3. Turing test for robot traders?
4. Hitchens writes about his cancer.
6. Paint it Black (fine music).
Sentences for Robin Hanson
Artists are the elite of the servant class
That is a quotation from Jasper Johns, tweeted here.
A polemic against New York City
New York’s entire economy is based on monopolies of information. Wall Street banks make a mint trading because they have inside information on the market flows of the products they trade. Literary agents arbitrage scarce access to book publishers against a mass of hopeful authors. Real estate brokers (and these are brokers on rental properties, not properties for sale) routinely make a 15% commission when you sign a lease, pocketing a good two-months salary (read, upwards of $5000) for the privilege of telling you where there’s an apartment free.
In New York, those monopolies go unchallenged.
The claim is that New York will never have a vibrant tech community, because of its hustler mentality and discomfort with "open information" models. The article seemed overstated to me (for one thing he has a Manhattan bias and neglects the importance of manufacturing to NYC), but still it is making a basic point of interest.
I liked this line, though I wonder about the cheap living:
Basically, startups flourish in the Bay Area the same reason the homeless do: decent weather, relatively cheap living, and no stigma attached to your lifestyle.
For the pointer I thank Chris F. Masse.
My 2010 Industrial Organization reading list
Industrial Organization I, Tyler Cowen (x2312, 4910), [email protected]
METHODS OF EVALUATION:
There will be weekly quizzes, a paper, and a final exam.
I. Firm behavior, antitrust, and vertical and horizontal control.
Asker, John, “A Study of the Internal Organization of a Bidding Cartel,” American Economic Review, (June 2010), 724-762.
Bresnahan, Timothy F. “Competition and Collusion in the American Automobile Industry: the 1955 Price War,” Journal of Industrial Economics, 1987, 35(4), 457-82.
Bresnahan, Timothy and Reiss, Peter C. “Entry and Competition in Concentrated Markets,” Journal of Political Economy, (1991), 99(5), 977-1009.
Timothy Bresnahan, “Empirical Studies of Industries with Concentrated Power,” Handbook of Industrial Organization, vol.II.
Tirole, Jean. “Vertical Control.” In Theory of Industrial Organization, Chapter 4.
Klein, Benjamin and Leffler, Keith. “The Role of Market Forces in Assuring Contractual Performance.” Journal of Political Economy 89 (1981): 615-641.
Breit, William. “Resale Price Maintenance: What do Economists Know and When Did They Know It?” Journal of Institutional and Theoretical Economics (1991).
McKenzie, Richard B. and Lee, Dwight, In Defense of Monopoly, chapter four, “Welfare-Enhancing Monopolies,” on reserve.
Tirole, Jean. “Information and Strategic Behavior: Reputation, Limit Pricing, and Predation.” In Theory of Industrial Organization, Chapter 9, on reserve.
Sproul, Michael. “Antitrust and Prices.” Journal of Political Economy (August 1993): 741-754.
McCutcheon, Barbara. “Do Meetings in Smoke-Filled Rooms Facilitate Collusion?” Journal of Political Economy (April 1997): 336-350.
Hazlett, Thomas W. “Is Antitrust Anticompetitive?” Harvard Journal of Law and Public Policy, (Spring 1986).
Crandall, Robert and Whinston, Clifford, “Does Antitrust Improve Consumer Welfare?: Assessing the Evidence,” Journal of Economic Perspectives (Fall 2003 ), 3-26, available at http://www.brookings.org/views/articles/2003crandallwinston.htm.
Holmstrom, Bengt and Tirole, Jean. “The Theory of the Firm,” in Handbook of Industrial Economics, vol.I.
Holmstrom, Bengt and Roberts, John. “The Boundaries of the Firm Revisited.” Journal of Economic Perspectives 12, 4 (Fall 1998): 73-94.
Gibbons, Robert. “Incentives in Organizations.” Journal of Economic Perspectives (Fall 1998): 115-132.
Montgomery, Cynthia. “Corporate Diversification,” Journal of Economic Perspectives (Summer 1994): 163-178.
Hansemann, Henry. “The Role of Non-Profit
Lazear, Edward P. “Leadership: A Personnel Economics Approach,” NBER Working Paper 15918, 2010.
Oyer, Paul and Schaefer, Scott, “Personnel Economics: Hiring and Incentives,” NBER Working Paper 15977, 2010.
Van den Steen, Eric, “Interpersonal Authority in a Theory of the Firm,” American Economic Review, 2010, 100:1, 466-490.
Ben-David, Itzhak, and John R. Graham and Campbell R. Harvey, “Managerial Miscalibration,” NBER working paper 16215, July 2010.
AER Symposium, May 2010, starts with “Why do Firms in Developing Countries Have Low Productivity?,” runs pp.620-633.
Glenn Ellison, “Bounded rationality in Industrial Organization,” http://cemmap.ifs.org.uk/papers/vol2_chap5.pdf
Xavier Gabaix and David Laibson, “Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets,” http://papers.ssrn.com/sol3/papers.cfm?abstract_id=728545.
Charness,
Cowen,
III. Capital structure and control
Miller, Merton, and commentators. “The Modigliani-Miller Propositions After Thirty Years,” and comments, Journal of Economic Perspectives (Fall 1988): 99-158.
Myers, Stewart. “Capital Structure.” Journal of Economic Perspectives (Spring 2001): 81-102.
Hart, Oliver. “Financial Contracting.” Journal of Economic Literature (December 2001): 1079-1100.
Easterbrook, Frank H. “Two Agency-Cost Explanations of Dividends.” American Economic Review (September 1984).
Baker, Malcolm and Wurgler, Jeffrey. “A Catering Theory of Dividends,” Journal of Finance (2004), available at http://pages.stern.nyu.edu/~jwurgler/.
Baker, Malcolm and Ruback, Richard. “Behavioral Corporate Finance: A Survey,” found at http://www.wcfia.harvard.edu/seminars/pegroup/BakerRubackWurgler.pdf
MacKinlay, A.C. (1997), “Event Studies in Economics and Finance”, Journal of
Economic Literature 35(1), 13-39.
Andrade, Gregor, et. al. “New Evidence and Perspective on Mergers.” Journal of Economic Perspectives (Spring 2001): 103-120.
Holmstrom, Bengt and Kaplan, Steven. “Corporate Governance and Merger Activity in the
Gompers, Paul and Lerner, Josh. “The Venture Capital Revolution.” Journal of Economic Perspectives (Spring 2001): 145-168.
Stein, Jeremy C. “Efficient Capital Markets, Inefficient Firms: A Model of Myopic Corporate Behavior.” Quarterly Journal of Economics 104 (November 1989): 655-670.
Stein, Jeremy C. “Takeover Threats and Managerial Myopia.” Journal of Political Economy (1988): 61-80.
Scharfstein, David S. and Stein, Jeremy C. “Herd Behavior and Investment.” American Economic Review 80 (June 1990): 465-479.
Hall, Brian and Murphy, Kevin J, “The Trouble with Stock Options,” Journal of Economic Perspectives, Summer 2003, also at http://www-rcf.usc.edu/~kjmurphy/HMTrouble.pdf.
Murphy, Kevin J. and Zaboznik, Jan. “CEO Pay and Appointments,” American Economic Review, May 2004, also at http://www-rcf.usc.edu/~kjmurphy/CEOTrends.pdf
Jensen, Michael, Murphy, Kevin J., and Eric Wruck. “Remuneration: Where We've Been, How We Got to Here, What are the Problems, and How to Fix Them,” available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=561305#PaperDownload.
Robert J. Gordon and Ian Dew-Becker, “Unresolved Issues in the Rise of American Inequality,” http://www.people.fas.harvard.edu/~idew/papers/BPEA_final_ineq.pdf
McKay, Alisdair and Reis, Ricardo, “The Brevity and Violence of Contractions and Expansions,” NBER Working Paper, 12400, 2010.
Gorton, Gary B. Slapped in the Face by the Invisible Hand: Banking and the Panic of 2007, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1401882, published on-line in 2009.
IV. Theory and Regulation of Natural Monopolies
pp. 21-275.
Demsetz, Harold. “Why Regulate Utilities?” Journal of Law and Economics (April 1968): 347-359.
Williamson, Oliver. “Franchise Bidding for Natural Monopolies – in General and with Respect to CATV.”
Crandall, Robert W. “An End to Economic Regulation?” available at http://www.brookings.org/views/papers/crandall/20030721.pdf.
Parente, Stephen L. and Prescott, Edward. “Monopoly Rights: A Barrier to Riches.” American Economic Review 89, 5 (December 1999): 1216-1233.
Shleifer, Andrei. “State vs. Private Ownership.” Journal of Economic Perspectives (Fall 1998): 133-151.
Chang, Roberto, Constantino Hevia, and Norman Loayza, “Privatization and Nationalization Cycles,” NBER Working Paper 16126, June 2010.
Berg and Tschirhart, pp. 480-522.
Associated other topics in regulation, depending on your interests; reading suggestions will follow later in the semester.
*The Korean War*
That's the new book by Bruce Cumings and it is as good as the reviews indicate (criticisms here). Here are a few choice excerpts:
For decades the South Korean intelligence agencies put out the line that Kim Il Sung was an impostor, a Soviet stooge who stole the name of a famous Korean patriot. The real reason for this smoke screen was the pathetic truth that so many of its own leaders served the Japanese…
And:
…Two Koreas began to emerge in the early 1930s, one born of an unremittingly violent struggle in which neither side gave quarter; truths experienced in Manchukuo burned the souls of the North Korean leadership. The other truth is the palpable beginning of an urban middle class, as peole marched not to the bugle of anti-Japanese resistance but into the friendly confines of the Hwashin department store, movie theaters, and ubiquitous bars and tearooms.
And:
…Most Americans seem unaware that the United States occupied Korea just after the war with Japan ended, and set up a full military government that lasted for three years and deeply shaped postwar Korean history.
And:
What hardly any Americans know or remember, however, is that we carpet-bombed the North for three years with next to no concern for civilian casualties…The air assaults ranged from the widespread and continual use of firebombing (mainly with napalm), to threats to use nuclear and chemical weapons, finally to the destruction of huge North Korean dams in the last stages of the war.
And, from the entire war:
Perhaps as many as 3 million Koreans died, at least half of them civilians (Japan lost 2.3 million people in the Pacific War).
You can buy the book here.