Payday loans

by  Tyler Cowen in

This afternoon, let’s just do "Control-C" from Craig Newmark:

Paige Skiba (Vanderbilt Law School) and Jeremy Tobacman (Oxford), "The Profitability of Payday Loans":

Payday loans provide households
with expensive, short-term liquidity. This paper studies the
profitability of payday lending using standard financial data from CRSP
and SEC filings and loan-level data from a payday lender. Despite
charging e¤ective annualized rates of many percent, we find lenders’
firm-level returns differ little from typical financial returns. The
data are consistent with an interpretation that payday lenders face
high per-loan and per-store fixed costs in a competitive market.

I’d bet a similar analysis applies to the rent-to-own industry.

Library of Lost Dreams

by  Alex Tabarrok in

Dutch, a kind of archaelogist of recent America, takes us through the abandoned Detroit School Book Depository.

Detroit_2

This is a building where our deeply-troubled public school system once
stored its supplies, and then one day apparently walked away from it
all, allowing everything to go to waste. The interior has been ravaged
by fires and the supplies that haven’t burned have been subjected to 20
years of Michigan weather. To walk around this building transcends the
sort of typical ruin-fetishism and "sadness" some get from a beautiful
abandoned building. This city’s school district is so impoverished that
students are not allowed to take their textbooks home to do homework,
and many of its administrators are so corrupt that every few months the
newspapers have a field day with their scandals, sweetheart-deals, and
expensive trips made at the expense of a population of children who can
no longer rely on a public education to help lift them from the cycle
of violence and poverty that has made Detroit the most dangerous city
in America. To walk through this ruin, more than any other, I think, is
to obliquely experience the real tragedy of this city; not some
sentimental tragedy of brick and plaster, but one of people.

Pallet after pallet of mid-1980s Houghton-Mifflin textbooks, still unwrapped in their original packaging, seem more telling of our failures than any vacant edifice. The floor is littered with flash cards, workbooks,
art paper, pencils, scissors, maps, deflated footballs and frozen
tennis balls, reel-to-reel tapes. Almost anything you can think of used
in the education of a child during the 1980s is there, much of it
charred or rotted beyond recognition. Mushrooms thrive in the damp ashes of workbooks. Ailanthus altissima, the "ghetto palm" grows in a soil made by thousands of books that have burned, and in the pulp of rotted English Textbooks. Everything of any real value has been
looted. All that’s left is an overwhelming sense of knowledge unlearned
and untapped potential.

More pictures here.

Naughty tourism

by  Tyler Cowen in

I could use a more explicit three-letter word in the post title but I fear the software censors employed by our federal government will again block this web site from its bureaucratic readers.  On this topic, I was quite taken by this passage:

"Ingrid," I commented, "If you really think she [the Haitian woman who was propositioned for money] needs a choice then I suggest you give her one.  Why don’t you offer to pay her thirty dollars not to come to my hotel room, but to go back to her son and cigarette stand?"

That is from Naked in Haiti: A…Morality Tale About Tourists, Prostitutes and Politicians, by Dan King.  This book has received very little notice but it’s a more interesting look at human commodification than anything you’ll find coming out of Harvard or Princeton.  I can only say that the author really seems to know what he is talking about, if you get my drift.  This work would not have been approved at university institutional review boards.  It’s also one of the best books on "life on the ground" in Haiti, at least provided you can tolerate the author’s numerous salacious yet nonetheless totally anti-erotic descriptions of his activities.

The author goes to Haiti, of course, not for the art, but because he wants to buy from women who are not (otherwise) "selling."  Of course that means that the level of poverty is quite desperate, as in Cuba, where the same phenomenon is common.  And often the women sell to benefit their children or parents, not themselves; surely some percentage of them are disgusted by what they end up doing.

If you’re wondering about my point of view on the whole question, I am sufficiently Paretian that I don’t find the exchange aspect of the relationship, or the passing of money, objectionable per se.  (Assuming, of course, that neither age nor coercion is a concern, and often both are.)  But it is still better, on the buying side, not to do it.  Once you are aware of the kind of human stories behind the other side of the market, I would think it is hard to maintain an unflagging interest in the proceedings at hand.  Nor do I think it would improve what happens in your life next.  Yes the transaction does benefit the seller in many cases, but apply the Modigliani-Miller theorem and rebundle your action into a different blend of charity and erotic self-satisfaction, all toward The Greater Good.

Or so I think.  If you offer your thoughts, please be polite in your rhetoric.

I thank an anonymous MR reader for the pointer to the book.

What’s new and exciting in economics?

by  Tyler Cowen in

David Leonhardt reports a clear winner:

I received dozens of diverse responses, but there was still a
runaway winner. The small group of economists who work at the Jameel
Poverty Action Lab at M.I.T., led by Esther Duflo and Abhijit Banerjee, were mentioned far more often than anyone else.

Ms.
Duflo, Mr. Banerjee and their colleagues have a simple, if radical,
goal. They want to overhaul development aid so that more of it is spent
on programs that actually make a difference. And they are trying to do
so in a way that skirts the long-running ideological debate between aid
groups and their critics.

*Crunch*, by Jared Bernstein

by  Tyler Cowen in

The book is the latest attempt to write a populist, Progressive economics tract.

There is a chapter called "Why do economists seem to fear inflation?  And why do prices always go up, never down?"

Imagine trying to answer those questions without ever writing the two words: "money supply."  Yes, there is talk of the Fed changing interest rates to affect the price level.  But in an odd converse to the famous joke about Milton Friedman, Bernstein just can’t bring himself to utter the "M word."  At first I thought it was a semantic oversight but when I came to the passage describing "the wage-price spiral" as "economists’ biggest inflationary nightmare" I realized I was wrong.

The chapter on the Fed does mention the money supply but in the context of describing the views of others and even then only in passing.

Yes I know that the broader monetary aggregates are endogenous and yes I know that it is somewhat of a mystery, in theoretical terms, exactly why open market operations are effective.  It is fine to acknowledge those complexities.  But still, it is no answer to give your readers Hamlet without the Prince or even any mention of his absence.

I would like to see Jared Bernstein called up on The Colbert Show and asked to do nothing but utter those two little words: "money supply."

How high is the U.S. poverty rate?

by  Tyler Cowen in

Here is some wisdom, from the non-libertarian, non-right-wing,  never-asked-to-contribute-to-the-WSJ-Op-Ed-page Lane Kenworthy:

Poverty comparisons across affluent nations typically use a “relative”
measure of poverty. For each country the poverty line – the amount of
income below which a household is defined as poor – is set at 50%
(sometimes 60%) of that country’s median income. In a country with a
high median, such as the United States, the poverty line thus will be
comparatively high, making a high poverty rate more likely…

Using a relative measure, the U.S. poverty rate is higher than Romania’s and only slightly lower than Mexico’s (see here). Similarly, Mississippi’s relative poverty rate is the same as Connecticut’s.

So when you hear that the U.S. poverty rate is about 20 percent, keep this in mind.  Here is more, including links to research.  Here is a response from Paul Krugman.  Note that Krugman’s initial Op-Ed stresses how the measured rate has not fallen over (some periods of) time, but his response simply cites a ranking of the U.S. among other wealthy nations, based on an absolute poverty rate.  Have the time series comparisons been jettisoned or should we stand by them?

Here is more useful information.  It’s also worth noting that poverty rate numbers do not take into account food stamps, housing subsidies, the Earned Income Tax Credit, and Medicaid, among other benefits.  Not to mention black market income and underreported income (often for EITC reasons); yes it is worth referring back to consumption data which show that the poor do quite a bit better than income data alone would indicate.  That said, a very good case can be made that we overinvest in fighting the poverty of the elderly and underinvest in fighting the poverty of children.

The bottom line: Be very suspicious when you hear talk about the poverty rate.  The real question, as stressed by James Heckman, is what rate of return we can hope to achieve from feasible interventions in favor of poor, young children.  That’s a much harder question to argue.  Heckman of course finds a high rate of return, so I suspect the key question centers around what is "feasible" given the imperfections of politics.  It’s worth noting that many federal anti-poverty programs have in fact failed, or so changed that we don’t even call them anti-poverty programs any more.  At the end of the day that calls for "better action" rather than inaction, but softening people up with overly pessimistic and uncritically presented numbers will probably make a good program less rather than more likely. 

Cherrypicking health care anecdotes

by  Tyler Cowen in

Yikes.  I know there is much more to the policy question than this story, but it is worth keeping in mind:

One such case was Debbie Hirst’s. Her breast cancer had metastasized, and the health service would not provide her with Avastin,
a drug that is widely used in the United States and Europe to keep such
cancers at bay. So, with her oncologist’s support, she decided last
year to try to pay the $120,000 cost herself, while continuing with the
rest of her publicly financed treatment.

By December, she had
raised $20,000 and was preparing to sell her house to raise more. But
then the government, which had tacitly allowed such arrangements
before, put its foot down. Mrs. Hirst heard the news from her doctor.
“He looked at me and said: ‘I’m so sorry, Debbie. I’ve had my wrists
slapped from the people upstairs, and I can no longer offer you that
service,’ ” Mrs. Hirst said in an interview…

Officials said that allowing Mrs. Hirst and others like her to pay
for extra drugs to supplement government care would violate the
philosophy of the health service by giving richer patients an unfair
advantage over poorer ones.

Patients “cannot, in one episode
of treatment, be treated on the N.H.S. and then allowed, as part of the
same episode and the same treatment, to pay money for more drugs,” the
health secretary, Alan Johnson, told Parliament.

And that is The New York Times.  Is Atlas Shrugging?

Addendum: More discussion here.

How honeytrappers work

by  Tyler Cowen in

Here are the rules, at least for the high-class guys:

…Martinez has "rules of engagement": The target must not
be drunk, there must be no touching, and the relative
attractiveness of the trapper to the target must be equal.

"It’s got to be a fair test," he explains. "So we make sure
that we don’t set a very attractive honey trapper on a not so
attractive target, and vice versa."

"The customer needs a fair answer to the question of
whether their husband or girlfriend is loyal."

So those who fail an "unfair" test count as loyal?  But since eighty percent of all those approached fail, maybe the point is simply to drive home the decisive nature of the infidelity.  A related question is whether the customer (usually the spouse) wants the target to pass or fail the test.  Furthermore what does the customer want to think about the customer’s own motives?  Here is the full story, and thanks to Jeffrey Ely for the pointer.

Getting oneself in hot water

by  Tyler Cowen in

I am surprised by all the opposition to my argument for not burning the unpublished Nabokov manuscript.  I say this: we limit all sorts of destructive transactions for the living, so why not every now and then a limitation upon the wishes of the dead?  I was not staking out the extreme (but possibly true) position that the wishes of the dead should count for nothing.

I might add that the status quo is permitting the Nabokov manuscript to
be published and that civil society has not collapsed.  Nor are people panicking that their gravestones will be overturned three years hence and sold to finance the expansion of the EITC.

In any case I propose a thought experiment.  If you disagree with me, you should never have read Kafka or Virgil, nor should you set foot in the British Museum, go to an ancient Egyptian art exhibit, or for that matter visit any ethnographic museum.  Lots of that stuff was taken from graves.  They probably didn’t want "the public" to look at it and yes that includes you.  How many of the nay-sayers will pledge they have behaved this way or even that they are much bothered they didn’t? 

Nor are you allowed to hear Doors tribute bands, remixed or recombined Beatle vocals (would John have approved?) and who knows about late Schubert or Mahler’s 10th?  Better safe than sorry and that goes for unapproved translations and editions as well, or how about any religious compendium that refers to the Hebrew Bible as "The Old Testament"?  Don’t even pick it up.  I do in fact regard Sussmayr’s completion of Mozart’s Requiem as an aesthetic crime but not a moral one; it is better to hear the work unfinished.  The really sad thing is how many people like the revised version.

My favorite things Spain, music

by  Tyler Cowen in

I need to do this country in pieces, starting with music:

Classical guitarist: Segovia, starting with his recordings of Bach.  It’s not just amazing technique, these are some of the best musical interpretations of Bach by anyone playing any instrument.  They are what I call lifetime choices for one’s collection.

Spanish pianist, playing Spanish music: Alicia de Larrocha is the obvious choice.  Her Albeniz and Granados recordings remain unsurpassed. 

Composer: Varese sounds much better live than on disc.  I’ve seen Amèriques twice and both were experiences to remember; here is a bit on YouTube.  Chailly and Boulez understand the music very well but the sounds and textures and rhythms simply don’t all come through if you’re not there.  (Addendum: Whoops!  Varese was born in France.)  The number two pick is tough but Rodrigo is underrated by many serious listeners, in part because of his exposure through classical pops.  Try his solo guitar pieces and throughout keep him in mind as a precursor of ambient music.  Tomás Luis de Victoria is an underrated Spanish Renaissance composer.

Cellist: It’s hard not to pick Pablo Casals, who had extraordinary depth in his phrasing.  I still feel duty bound to point out that most of his recordings are unlistenable, if only because of the scratching.  The Bach is of historic importance but for actual pleasure his Schubert is your best bet.  Most of all the recording of the String Quintet.

Album about: Miles Davis, Sketches of Spain.  One of my three or four favorite Miles CDs, so an easy pick.  Admittedly the move toward an "acoustic-electric" sound does not appeal to all jazz fans, so this album remains underappreciated.

Opera singer: Lots of riches.  Placido Domingo is a good pick though you could argue for many other names as well.

Popular music:  Help!

Flamenco: I love it in small clubs but not on disc or even in mid-sized university music halls. 

The bottom line: There are plenty of peaks but overall I am struck by the unbalanced nature of the distribution.

Many people embarrass themselves over Fidel Castro

by  Tyler Cowen in

Here is one menagerie, with Brad DeLong parrying ably.  A simple checklist would start with the question of whether an apologist has visited both the Dominican Republic and Cuba.  And a non-communist Cuba could have done much better than the DR.  It is a fascinating place for visitors, but right now the quality of life in Cuba isn’t close to that of the DR or for that matter Honduras, the second-biggest Latino mess in the hemisphere.  While we’re at it, let’s not forget northern Mexico or even central Mexico.  It’s time to stop apologizing for communist dictatorships; are you really so taken with the idea of confiscating property as to overlook decades of tyranny, impoverishment, and human misery?  Yes I am familiar with the UN social indicators; I say you need to visit each of these countries, preferably speaking Spanish, and then report back to me.