*Wilco*, by Wilco
If you aggregating a lot of binary opinions, I vote yes you should buy it. It's more accessible and less mysterious-sounding than their usual fare, which you may consider either a plus or a minus. If you're wondering what my underlying stance is, a few days ago I said to Brian Hooks something like: "I'm glad I've never really been a fan, that leaves me free to enjoy them without feeling threatened by what they stand for."
Status games among the Amish
Some Amish bishops in Indiana weakened restrictions on the use of
telephones. Fax machines became commonplace in Amish-owned businesses.
Web sites marketing Amish furniture began to crop up. Although the
sites were run by non-Amish third parties, they nevertheless
intensified a feeling of competition, says Casper Hochstetler, a
70-year-old Amish bishop who lives in Shipshewana.
"People wanted bigger weddings, newer carriages," Mr. Lehman says.
"They were buying things they didn't need." Mr. Lehman spent several
hundred dollars on a model-train and truck hobby, and about $4,000 on
annual family vacations, he says. This year, there will be no vacation.
It became common practice for families to leave their carriages home and take taxis on shopping trips and to dinners out.
Some Amish families had bought second homes on the west coast of
Florida and expensive Dutch Harness Horses, with their distinctive,
prancing gait. Others lined their carriages in dark velvet and
illuminated them with battery-powered LED lighting.
Most of the article concerns a recent bank run in an Amish community:
Only Amish people can join. The trust's 2,100 depositors receive
annual interest of 3.2%, while borrowers pay 3.5% interest on loans.
There are no credit checks. Monthly mortgage payments can be no more
than 33% of a borrower's gross income.
The trust's structure reflects the Amish philosophy of sharing. It
isn't insured by the Federal Deposit Insurance Corp., but by its own
bylaws it maintains at least $1 million in cash reserves. The trust has
never exercised its authority to foreclose on a home.
A sustained run wiped out the bank's reserves and now it has ceased lending. Probably it is hard to gather the data, but I would love to read a book Economic Life Among the Amish.
Update on the public plan
Ruth Marcus tells Democrats not to go to the wall for it. She is not personally against the presence of a public plan, she just doesn't think it is a "do or die" question. There are other ways of making the sector more competitive, if need be.
Here is the veteran commentator Wisewon on the public plan.
As Ezra Klein indicates, the health insurance exchanges are a more important part health care reform. Here is a progressive symposium on the public plan; read Paul Starr.
Brad DeLong writes:
We should set up a public plan, let it compete with the privates, and
see if it can provide care people like more cheaply than the private
insurance companies. Friedrich Hayek would approve: the idea is to use
the market as an institutional discovery mechanism.
Is this the SOE model? I'm still stuck on what the public plan will be instructed to maximize, much less what it will end up maximizing after ?? years of Congressional interference. And exactly who in our government will mimic the behavior of shareholders?
Assorted links
1. Boston Globe story about Peter Leeson.
2. Seth Godin weighs in on Gladwell vs. Anderson.
4. The macroeconomics of Australia, with a poke at Kiwis at the end.
How to fight corruption in Nepal
The Nepalese government plans to issue pants to airport workers that have no pockets.
A spokesman said trousers without pockets would help the authorities “curb the irregularities”.
The move comes after the prime minister of Nepal said corruption was damaging the airport’s reputation, AFP reported.
Apparently without pockets it is harder to take bribes. (You also can file this under "Carrying costs > liquidity premium.") The pointer is from Air Genius Gary Leff, who I might add is allowed to wear pockets.
Ben Casnocha reviews *Create Your Own Economy*
I am delighted with the review, which is more like a review essay, with many interesting observations on internet culture as well as on the book. The essay title is "RSSted Development." Excerpt:
…the intellectual and emotional
stimulation we experience by assembling a custom stream of bits. Cowen
refers to this process as the “daily self-assembly of synthetic
experiences.” My inputs appear a chaotic jumble of scattered
information but to me they touch all my interest points. When I consume
them as a blend, I see all-important connections between the different
intellectual narratives I follow a business idea (entrepreneurship) in the airplane space (travel), for example. Because building the blend is a social exercise real communities and friendships form around certain topics my
social life and intellectual life intersect more intensely than before.
And I engage in ongoing self-discovery by reflecting upon my interests,
finding new bits to add to my stream, and thinking about how it all
fits together.
Cowen maintains that these benefits enhance your internal
mental existence; how you order information in your head and how you
use this information to conceive of your identity and life aspirations
affects your internal well-being. Because a personal blend reflects a
diverse set of media (think hyper-specific niche news outlets in lieu
of a nightly news broadcast that everyone watches on one of three
networks), and because each person constructs their own stories to link
their inputs together, the benefits are unique to the individual. They
are also invisible. It is impossible to see what stories someone is
crafting internally to make sense of their stream; it is impossible to
appreciate the personal coherence of it.
The way the benefits of info consumption
habits accrue privately but are perceived publicly approximates
romance, Cowen adds. Compare a long-distance relationship to a
proximate one. In a long-distance relationship, you have infrequent but
very high peaks when you see each other. Friends see you run off for
fancy getaway weekends when the sweetheart comes to town. Yet
day-to-day it is not very satisfying. In a marriage by contrast you
have frequent, bite-size, mundane interactions which rarely hit peaks
or valleys of intensity. The happiness research that asserts married
couples are happier than non-married ones and especially happier than
couples dating long-distance is not always self-evident. Outsiders see
the inevitable frustrations and flare-ups that mark even stable
marriages. What they cannot see is the interior satisfaction that the
couple derives by weaving together these mundane moments into a
relationship rich in meaning and depth, and in writing a shared life
narrative that is all their own.
After reading the essay, I wonder how many blogs Ben has in his RSS feed…
Markets in everything, vending machines edition
John de Palma has much to offer today:
An entrepreneur who used
his redundancy money to start a business selling foldable shoes from a
vending machine is to launch in America. Matt Horan's £5 Rollasole is
an emergency flat shoe women can change into from their stiletto heels
for the walk home after a night out. The pumps are already on sale in
Ibiza superclubs Eden and Space(…)
Link here. No, innovation is not dead:
…Katie Shea, a senior at
the Stern School of Business at New York University, is instead
pursuing her dreams of entrepreneurship. She has founded a shoe company
that designs and imports collapsible shoes that women can wear while
walking to work and then stuff into their pocketbooks…"
But where is the vending machine? Scrub that one. I want something different from my vending machines:
…Over the last decade, Mr. Torghele, 56, an entrepreneur in this
northern Italian city who first made money selling pasta in California,
has developed a vending machine that cooks pizza. The machine does not
just slip a frozen pizza into a microwave. It actually whips up flour,
water, tomato sauce and fresh ingredients to produce a piping hot pizza
in about three minutes…
Here are previous MR posts on vending machines. Here is my favorite.
Video testimonials to the Cowen/Tabarrok Principles text
You will find them here. If you are thinking of using the book for a course, please write us and we will try to get you a review copy. There is a macro book, a micro book, and a combined volume.
Assorted links
1. Transcapitalist blog, by Melody Hildebrandt and Anita Gardeva.
2. The impunity game: rejecting free money out of anger.
4. Are bubbles welfare-improving?
5. Is the traditional theory of consumer behavior sometimes *correct*?
In which regards are autistics more rational?
Many bloggers are citing a recent Scientific American piece, one part of which covers how autistics come closer to satisfying some canons of economic rationality. Since I discuss the underlying research in Create Your Own Economy, I should point out that the SA article doesn't quite get it right. They serve up:
One group that does not value perceived losses differently than gains are individuals with autism…
I would sooner describe the underlying research as showing that framing effects are weaker (NB: not absent) for autistics. That is, for the autistics it matters less whether a given change in endowment is described as a gain or a loss, relative to varying frames. I read the SA account ("when balancing gains and losses") as conflating framing and endowment effects; in any case the exposition is not clear.
SA writes:
…this seeming rationality may itself denote abnormal behavior…
An alternative would have been: "The autistics are in this way more rational."
One underexplored question is whether most people distrust those who are not irrational in particular, commonly realized ways. Even the researchers on the original piece considers the superior performance of autistics on the test to be a sign of their processing "failures."
Another part of the piece concerns the skin conductance responses; there is preliminary evidence that autistics approached the framed choices in a less emotional manner, at least by that one measure.
Create Your Own Economy considers a number of possible overlaps between economics and autism, including Vernon Smith's claim that Adam Smith was himself on the autism spectrum. It also considers other ways in which autistics are likely to be more rational, such as being less likely to encode false memories and less likely to resort to excessive use of narrative to organize their memories and explanations.
Aid Realism for the Idealist
The failure of foreign aid to lead to economic development has left many cynics in its wake. For this reason, I enjoyed The Blue Sweater, Jacqueline Novogratz's story of moving from aid-idealism to aid-realism without ever passing through the way-station of aid-cynicism. As a naive, aid-idealist Novogratz spent a lot of time on the circuit in Africa; eventually hard lessons wore away the naivety but not the idealism. Of course, Novogratz learned a lot about the corruption, failure to experiment, and lack of accountability of the aid agencies but she also learned to be realistic about the do-gooders:
Philanthropy can appeal to people who want to be loved more than they want to make a difference.
But the hardest lessons were about the poor. In the late 1980s, Novogratz worked with a group of native women to build up a thriving business in Rwanda. Inevitably some of her friends became terrible victims of the 1994 genocide. Perhaps even worse, some of her friends became perpetrators. Hard lessons like these drove Novogratz's evolution.
I've read the following sort of thing many times:
It is so often the people who know the greatest suffering–the poor and most vulnerable–who are the most resilient, the ones able to derive happiness and shared joy from the simplest pleasures.
I've heard it so many times, I tend to dismiss it but Novogratz follows up with this:
That same resilience, however, can manifest itself in passivity, fatalism, a resignation to the difficulties of life that allows injustice and inequity to strengthen and grow…
Which, for me at least, turned a trite observation into an important insight.
Novogratz's experiences eventually developed into the Acumen Fund, a venture capital firm for aid. The idea is to invest patient capital in scalable, for-profit businesses that deliver services to the poor. The fund, for example, has invested in a firm producing drip irrigation systems in Pakistan, a Tanzanian firm that produces mosquito nets and an Indian firm producing internet-telephone kiosks in small villages.
The fact that the businesses have been for-profit has been critical. In selling bed nets for example the Tanzanian firm learned that talking about malaria doesn't sell. What sells, in the words of one of their top salespersons is, "The color is beautiful, and you can hang the nets in your windows so that your neighbors know how much you care about your family." As Novogratz puts it:
Beauty, vanity, status and comfort….The rich hold no monopoly on any of it. But we're a long way from integrating the way people actually make decisions into public policy instead of how we think they should make them.
Patient capital is no panacea–what is?–but by investing in entrepreneurs who must listen to their customers a charitable venture-capital firm can multiply the effectiveness of its philanthropy.
There is a powerful role both for the market and for philanthropy…Philanthropy alone lacks the feedback mechanism of markets, which are the best listening devices we have; and yet markets alone too easily leave the most vulnerable behind.
Cap-and-trade-war
Eric Posner and Paul Krugman defend the use of tariff threats against polluting countries, such as China. I'll outsource my response to an earlier post by Matt Yglesias:
The bottom line about the international aspects of climate change is that the very idea of an effective response assumes
the existence of a generally cooperative international environment. It
doesn’t assume the non-existence of the odd “rogue” state here or
there, but it assumes the absence of any kind of serious great power
rivalries. Not just China, but also India and probably Russia, Brazil,
and Indonesia as well are going to need to cooperate in a serious way
with the OECD nations on this. And I just don’t see how you’re going to
get where you need to get through coercion. If anything, I think
attempted economic coercion of China is more likely to wind up breaking
down solidarity between the US, EU, and Japan than anything else.
First, we impose our carbon tariff. Then suddenly Airbus and European
car companies are getting all kinds of sales because the EU hasn’t
followed suit. Now not only are the Chinese mad at us, we’re mad at the
Europeans. Optimistically, at this point everyone decides coercion is unworkable and we start to back away.
I'll say it again: the current version of Waxman-Markey will make things worse. Keep in mind by the time we are slapping those 2020 tariffs on China, we won't have made much progress on emissions ourselves. How would we feel, and how would it influence our domestic politics, if the Chinese demanded we pass Waxman-Markey, while polluting at a high level themselves, or otherwise they will stop buying our Treasury securities?
Malcolm Gladwell dissents from Chris Anderson’s *Free*
Here are excerpts and the full original article. Excerpt:
Credit Suisse estimates that YouTube will lose close to half a billion
dollars this year. If it were a bank, it would be eligible for TARP funds.
I haven't read the book yet, but hope to report back when I do. For this pointer I thank Eric Wignall.
Addendum: Via Chris F. Masse, Anderson responds.
Knowledge and Decisions
Today I wanted to cover lots of different topics, so here is a thought from Thomas Sowell:
Perhaps people who are busy gushing over the Obama cult
today might do well to stop and think about what it would mean for
their granddaughters to live under sharia law.
And to think that I was worried about high marginal rates of taxation. The full article is here.
Not so long ago, Yana asked me: "What does Thomas Sowell think of Barack Obama?" I believe I now have an answer for her.
The Dark Theorem of Economics
Christopher J. Ayres sends me a paper.with the following abstract:
I begin by proving the "Dark Theorem of Economics," from which it follows that the foundations of economic theory rely on the Axiom of Choice (AC). All current solution concepts in game theory
also require the theorems implied by AC. In particular, lexicographic utility, lexicographic probability, the real line being well-ordered, and the existence of a universal space are all equivalent to AC; therefore any argument to disprove their existence must be false. Any proofs using properties that fail under AC must be redone. The concept of Nash Equilibrium becomes either a tautology (in the absence of AC) or violates rationality (in the presence of AC); we provide an example demonstrating this. Knowledge, Common Knowledge, Epistemics, Game Theory, and Macroeconomics (through the failure of Rational Expectations) must be rebuilt. Any economics Â…field or concept relying on these must also be rebuilt. I begin this process with the deÂ…finition of "Fundamental Game."
I joked with Chris that the other people who pursued this line of inquiry met with unfavorable ends. But that doesn't mean he is wrong. Fortunately, I am a pragmatist when it comes to the foundations of economic theory or lack thereof. It's hard enough to define what a number is, so if you push on the foundations of micro theory, don't expect a completely comfortable journey.