Guatemala fact of the day

by  Tyler Cowen in

A historic case of extraterritoriality was the seizure of the railways of Nicaragua by Brown Brothers Harriman, a U.S. banking firm. Under the Knox-Castrillo Treaty of 1911 these railroads became legally part of the State of Maine, according to former president of Guatemala, Juan José Arévalo, in his book The Shark and the Sardines (Lyle Stuart, New York, 1961), pp. 210–220.

That's from the Wikipedia entry on extraterritoriality, a concept which none of you seem to have mentioned yesterday, at least last I looked.  It's an old idea and here is Shih Shun Liu's seminal work Extraterritoriality: Its Rise and Decline.  Here is a map of the Shanghai concessions and here are other Chinese ports.  Liu describes Martens's Das Consularwesen
und die Consularjurisdiction im Orient as "indispensable".  Many applications of the idea originate with the Crusades.  Here is the Italian version of the concept.

I would count Puerto Rico, although it does not quite fit the formal definition, as a relatively successful application of the concept; the Panama Canal zone was another example.  It is harder to find good examples with a more recent origin and it is unlikely the idea will be applied, say, to either Kaliningrad or the Kurdish part of Iraq.  Here are comments from Will Wilkinson.

The U.S. Senate, by the way, did not ratify the Knox-Castrillo treaty.

Via you-know-who

by  Tyler Cowen in

There is strategy involved in giving and interpreting compliments. 
Let’s say you hear someone play a difficult –but not too difficult–
piece on the piano, and she plays it well.  Is it a compliment if you
tell her she played it beautifully?

That depends.  You would not be impressed by the not-so-difficult
piece if you knew that she was an outstanding pianist.  So if you tell
her you are impressed, then you are telling her that you don’t think
she is an outstanding pianist.  And if she is, or aspires to be, an
outstanding pianist, then your attempted compliment is in fact an
insult.

This means that, in most cases, the best way to compliment the
highly accomplished is not to offer any compliment at all.  This
conveys that all of her fine accomplishments are exactly what you
expected of her.  But, do wait for when she really outdoes herself and
then tell her so.  You don’t want her to think that you are someone who
just never gives compliments.  Once that is taken care of, she will
know how to properly interpret your usual silence.

In the world of blogs, when you comment on an article on another
blog, it is usually a nice compliment to provide a link to the original
post.  This is a compliment because it tells your readers that the
other blog is worth visiting and reading.  But you may have noticed
that discussions of the really well-known blogs don’t come with links. 
For example, when I comment on an article posted at a blog like
Marginal Revolution, I usually write merely “via MR, …” with no link.

That’s the best way to compliment a blog that is, or aspires to be,
really well-known. It proves that you know that your readers already
know the blog in question, know how to get there, and indeed have
probably already read and pondered the article being discussed.

Pretty excellent, no?

Addendum: An explanation, from the one you would expect.

A new paper on life expectancy

by  Tyler Cowen in

This isn't quite news, but here's the latest word, from Samuel Preston and Jessica Ho:

Life expectancy in the United States fares poorly in international
comparisons, primarily because of high mortality rates above age 50.
Its low ranking is often blamed on a poor performance by the health
care system rather than on behavioral or social factors. This paper
presents evidence on the relative performance of the US health care
system using death avoidance as the sole criterion. We find that, by
standards of OECD countries, the US does well in terms of screening for
cancer, survival rates from cancer, survival rates after heart attacks
and strokes, and medication of individuals with high levels of blood
pressure or cholesterol. We consider in greater depth mortality from
prostate cancer and breast cancer, diseases for which effective methods
of identification and treatment have been developed and where
behavioral factors do not play a dominant role. We show that the US has
had significantly faster declines in mortality from these two diseases
than comparison countries. We conclude that the low longevity ranking
of the United States is not likely to be a result of a poorly
functioning health care system.

A non-gated version is here.

Charter Cities

by  Alex Tabarrok in

Paul Romer's TED talk on charter cities is up and Romer is now writing more about the idea at his Charter Cities Blog.  In the TED talk and on the blog Romer gives a "fanciful" example of how a charter city might work:

Imagine
that the United States and Cuba agree to disengage by closing the
military base and transferring local administrative control to Canada…

To
help the city flourish, the Canadians encourage immigration. It is a
place with Canadian judges and Mounties that happily accepts millions
of immigrants. Some of the new residents could be Cuban émigrés who
return from North America. Others might be Haitians who come work in
garment factories that firms no longer feel safe bringing into Haiti…

Initially,
the government of Cuba lets some of its citizens participate by
migrating to the new city. Over time, it encourages citizens to move
instead to a new city that it creates in a special economic zone
located right outside the charter city, just as the Mainland Chinese
let its citizens move into Shenzhen next to Hong Kong.

With
clear rules spelled out in the charter and enforced by the Canadian
judicial system, all the infrastructure for the new city is financed by
private investment. The Canadians pay for the government services they
provide (the legal, judicial, and regulatory systems, education, basic
health care) out of the gains in the value of the land in the
administrative zone. This, of course, creates the right incentives to
invest in education and health. Growth in human capital makes income
grow very rapidly, which makes the land in the zone even more valuable. 

It's interesting to compare charter cities to Patri Friedman's concept of seasteading (Alex, Tyler). 
Both charter cities and seasteading are motivated by the desire to
break out of conventional political arrangements and create a system
with much greater scope for innovation in rules.

Romer wants
charter cities built on uninhabited land (of which there is plenty),
seasteading is cities built on the sea (even more plentiful).  Aside
from the obvious advantage of building on land, charter cities allow
current elites to buy-in and gain from the charter city (ala Shenzhen and in other ways)
and thus probably have a better chance of getting "on the ground." 
Charter cities also address a key question about seasteading – will
governments regulate or takeover a successful seastead?  A charter city
is an agreement between governments – Cuba agrees to let Canada
import Canadian rules onto a small portion of Cuban property.  Cuba
could renege on the deal but it's going to be much harder for Cuba to
renege on Canada than for the U.S. government to regulate or otherwise
control seasteading.

By the way, the fact that Romer wants charter cities built on uninhabitated land with plenty of immigration from the charter nation goes some way to reducing the problem of nationalism that concerns Tyler and also the problem of transplanting legal institutions that concerns Arnold Kling.

We don't have many examples of charter cities in action but Hong Kong is a promising example.  Despite nationalism, the agreement with Britain was accepted for over 100 years and it worked.  Contra Tyler, we shouldn't think of what happened in 1997 as China
taking over Hong Kong but rather as the final element of Hong Kong taking
over China.

Seasteading does have one big advantage over charter
cities.  Seasteading is more radical but it is more open, less
tied to elites, and more flexible so, if it works, it is a better design for what Romer
calls innovation in rules formation.

Palermo notes

by  Tyler Cowen in

I had been expecting "Naples squared" when it comes to raucous, but it's peaceful.  The best dishes apply flavors of mint, orange, and pistachio to pasta and seafood.  Wrapping pumpkin in a fish slice is yummy.  How about sardines pasta, with raisin, pine nuts, and bread crumbs; capers are optional?  Imagine a counterfactual retracing of food history, piling New World ingredients on top of Arabic and medieval roots — without the French culinary interventions of the eighteenth century and beyond — and you get some notion of dining in Sicily.  Imagine Moroccan bistillah but with a fruit jam inside.

The remaining traces of Norman Sicily are mingled with Roman, Arabic and Catalonian architectural influences.  There are numerous seventeenth-century baroque oratorios.  All over you see photocopy shops, which I suppose means few homes or workplaces have printers.

The young people look like they're from Rome, the old people look like they're from New Jersey. 

When there is a traffic dispute, people yell back at the cops. 

At least two-thirds of all restaurants are closed for August, including most of the best-known places.  Yet even random eating in major public squares (usually a no-no) reveals a food culture which has to rank among the world's best, up there with Tokyo, Bangkok, Singapore, Bombay, and the Puebla/Oaxaca axis, among a few select others.

Can Murdoch charge for the web?

by  Tyler Cowen in

Here is the news, which is probably old to you by now.  Hit&Run asks:

It's never wise to challenge Rupert Murdoch's media savvy, but I don't
see any scenario in which the market for paid electronic content is
better today than it was in 2005, or 1996, or 1995.

I see one big difference.  In those other years, competing media outlets were willing to give away their product for free.  This time around plausibly all the major newspapers will follow suit and charge for their content as well.  It's like one of those Lester Telser/George Bittlingmayer models except now we are at the point where the major players realize they are all below their average cost curves permanently and they are not willing to incur losses indefinitely.  Since we've not yet been in an all-charging equilibrium, we don't know what the price will be.  What does the NYT business model look like at $50 a year for access, with price breaks for India?

In that equilibrium does any newspaper gain from defecting and moving back to p = 0?  Is there a stable core to the game?  Isn't Murdoch simply signaling that all the newspapers ought to collude?

Won't NPR, and NPR.org, be the big winner?

I'm not saying the Murdoch move is going to "work."  I am saying that if the game has no core the idea of charging for content will not go away.

Matt Yglesias outlines an intelligent version of libertarianism

by  Tyler Cowen in

Picking up my previous request, Matt responds:

I think libertarianism is best understood as a kind of esoteric
doctrine. There’s strong evidence to believe that people who
overestimate their own efficacy in life wind up doing better than those
with more accurate perceptions. It follows that it’s strongly desirable
for society to be organized so as to bolster myths of meritocracy. This
will lead to individual instances of injustice and to a lot of
apparently preventable suffering, but over the long-term the aggregate
impact of growth (which, of course, compounds) on human welfare will
swamp this as long as we can maintain the spirit of capitalism.

A separate issue is the welfare of the world’s poorest. Progressive
internationalists have this kind of dopey vision of trying to make
trade and immigration policy win-win-win for everyone by using
redistributive taxation to ensure that everyone shares in the benefits.
That sounds nice, but it means that in addition to trying to conquer
people’s racist and nationalistic instincts you’re also
engaged in a fight to pry wealth out of the hands of the wealthy and
powerful. As a political strategy, it doesn’t really make much sense.
Why not simply join forces with the wealthy and powerful so
as to create a political coalition that’s plausibly capable of
overwhelming xenophobia and creating borders that are relatively open
to the flow of goods and labor?

That is exactly the kind of response I was hoping for and both points make sense to me.  Here is a related Matt post on progressivism and America.

I would add that Matt's description is consistent with my belief that the United States should be less progressive than the polities of north and western Europe.  For better or worse, most Europeans are more skeptical of claims of capitalist meritocracy and thus it is harder for them to realize gains by internalizing such an ethic.  Furthermore the non-progressive nature of many aspects of America — by encouraging economic dynamism — helps Europe to be as progressive as it is.  That's an argument for American capitalism that both libertarians and progressives ought to feel slightly uncomfortable with, yet in my view it is compelling.

Which business is this?

by  Tyler Cowen in

Take a guess before you read too far:

His last quarter’s results,
which were announced on Wednesday, revealed a loss of $2.4 billion. The
business is on track to lose a staggering $7 billion in 2009, on around
$68 billion in revenue. That’s practically General Motors territory.What
can he do to fix the situation? Surprisingly little. His employees have
clauses in their union contracts that forbid layoffs. Nor can he
renegotiate their gold-plated benefits, the way, say, the auto
companies did when their backs were against the wall. Political
pressure makes it nearly impossible to shut down any of his company’s
34,000 facilities, no matter how outmoded or little used. He can borrow
money, but under the law, he can add only $3 billion in debt a year…

Every year between now and 2016, he has to put aside over $5 billion to
finance health benefits for future employees. You read that right:
future employees. There isn’t another business in the country that
finances benefits for employees it hasn’t even hired yet.

…A few weeks ago, the Government Accountability Office added the Postal Service to its list of “high risk” federal agencies,
meaning that it is in such dire straits that it needs “to restructure
to address its current and long-term financial viability.” Indeed, if
something doesn’t change by the fall, the Postal Service will have to
renege on those health benefit prepayments – despite its legal
obligation to pay them – or start missing payroll.

That's from the NYT, not The Weekly Standard.  They are also talking of moving to mail delivery only five days of week, an idea which originated from the postal service itself.  Many private businesses, in contrast, prefer to respond to crisis by trying to sell more of their product.  In fairness, it should be noted that the institution had a better record in the 2001-2006 period.

Bjorn Lomborg supports a climate change treaty

by  Tyler Cowen in

Really:

Bjorn Lomborg, an influential figure among climate change sceptics,
has thrown his weight behind a drive to forge a global deal to halt
rising world temperatures at a summit in Copenhagen this year.

“It’s incredibly important. We need a global deal on the climate,” Mr Lomborg told the Financial Times.

He does argue, correctly, that we should first focus on the low-hanging fruit, such as soot emissions and methane.

How good is the post office really?

by  Tyler Cowen in

A number of progressive bloggers have been making the point that most Americans approve of the postal service, or that they personally have had good experiences there.  They then seem to be concluding that the quasi-monopoly arrangement in that sector is likely efficient and the example of the post office should not be cited as evidence for government failure.

I do not find these arguments persuasive.

The following argument might work: "With competition in postal delivery, the natural market structure is duopoly (think UPS and FedEx), so price wouldn't fall much, coordination problems across dual networks would occur, and some rural users would be worse off.  So the current quasi-monopoly works about as well as we can hope for."

That is the argument which best defends the current structure of the post office as a privileged quasi-monopoly.

The real costs of the quasi-monopoly are the innovations and cost reductions we might have had but didn't, whether those are large or small (or negative possibly).  I doubt that the public is estimating that path when expressing their approval of the post office.

For obvious reasons, an inefficient quasi-monopolist might run high costs and overinvest in public relations.  Some of the world's worst post offices have pretty stamps and the guy behind the counter really does smile like grandpa.

From the comments: "After you consider the miracle of 40-50 cent Kiwi, does $.44 for first class mail sound like a bargain?"  The Kiwi fruit, of course, probably comes from Italy or New Zealand and it has to be grown and protected from bruising and shipped a long way.  It's a tricky comparison, however, read the comments here.