Solve for the Eastern equilibrium
Russia’s sabre-rattling in Ukraine has reignited the debate in Finland as to whether the Nordic country should join Nato, defying demands from Moscow that seek to limit expansion of the military alliance in Europe.
Both president Sauli Niinisto and prime minister Sanna Marin used their new year addresses to underscore that Finland retained the option of seeking Nato membership at any time.
“Let it be stated once again: Finland’s room to manoeuvre and freedom of choice also include the possibility of military alignment and of applying for Nato membership, should we ourselves so decide,” Niinisto said.
Here is more from Richard Milne at the FT.
Dan Wang’s 2021 letter
Here it is, one of the better written pieces of this (or last) year. It is mostly about China, manufacturing, and economic policy, but here is the part I will quote:
But Hong Kong was also the most bureaucratic city I’ve ever lived in. Its business landscape has remained static for decades: the preserve of property developers that has created no noteworthy companies in the last three decades. That is a heritage of British colonial rule, in which administrators controlled economic elites by allocating land—the city’s most scarce resource—to the more docile. Hong Kong bureaucrats enforce the pettiest rules, I felt, out of a sense of pride. On the mainland, enforcers deal often enough with senseless rules that they are sometimes able to look the other way. Thus a stagnant spirit hangs over the city. I’ve written before that Philip K. Dick is useful not for thinking about Hong Kong’s skyline, but its tycoon-dominated polity: “governed by a competent but fundamentally pessimistic elite, which administers a population bent on consumption. Instead of being hooked on drugs and television like in PKD’s novels, people in Hong Kong are addicted to the extraordinary flow of liquidity from the mainland, which raises their asset values and dulls their senses.”
And then on Mozart:
Among these three works, Figaro is the most perfect and Don Giovanni the greatest. But I believe that Cosi is the best. Cosi is Mozart’s most strange and subtle opera, as well as his most dreamlike. If the Magic Flute might be considered a loose adaptation of Shakespeare’s Tempest—given their themes of darkness, enchantment, and salvation—then Cosi ought to be Mozart’s take on A Midsummer Night’s Dream.
Donald Tovey called Cosi “a miracle of irresponsible beauty.” It needs to be qualified with “irresponsible” because its plot is, by consensus, idiotic. The premise is that two men try—on a dare—to seduce the other’s lover. A few fake poisonings and Albanian disguises later, each succeeds, to mutual distress. Every critic that professes to love the music of Cosi also discusses the story in anguished terms. Bernard Williams, for example, noted how puzzling it has been that Mozart chose to vest such great emotional power with his music into such a weak narrative structure. Joseph Kerman is more scathing, calling it “outrageous, immoral, and unworthy of Mozart.”
I readily concede that the music of Cosi so far exceeds its dramatic register.
Recommended! There is much more at the link, substantive throughout. Though I should note I am less bullish on both manufacturing and China than Dan is. I fully agree about Bleak House, however, and at times I think it is the greatest novel written…
New Year’s assorted links
1. Galbraith on Krugman and price controls, channeled through Kelton. Guess which side I agree with? And PK follow-up.
2. It is appropriable cereal gains that lead to the state.
3. I can’t review it without spoiling it, but The Lost Daughter (Netflix, based on Ferrante) is a very good movie.
5. MIE: “Mothers are memorializing their breastfeeding experiences with stones made from the liquid.” (NYT)
Fracking to Europe’s Rescue
Fracking has lowered energy prices and generated huge benefits to the US economy (e.g. here, here.) Western Europe in contrast has mostly banned fracking or put in place large regulatory barriers:
Bloomberg: Germany, France, the Netherlands, Scotland and Bulgaria all effectively ban fracking. The only major activity is in Ukraine, which is weaning itself off of Russian gas, and in the U.K., where the government is promoting the technology to help replace plunging domestic output from the North Sea. In October, Cuadrilla Resources won permission to frack as many as four wells in the U.K., ending a two-and-a-half year battle with local authorities. In 2011, tremors caused by an exploratory Cuadrilla rig in northwestern England led to a one-year moratorium on fracking in the country. In 2013, hundreds of protesters camped in a tiny village south of London until the company abandoned its well there. People in Zurawlow, a town in eastern Poland, successfully blockaded a fracking site in 2012 and Greenpeace activists have occupied a shale gas rig in Denmark.
The differences may be due to US land policy which recognizes the landowner rather than the state as the owner of mineral rights (the resources under the land)–thus, despite huge campaigns against fracking in the US, the landowners were a natural balancing constituent.
The US fracking revolution has made the US energy independent while Europe uncomfortably relies on large imports from Russia. Yet, even though Western Europe has mostly banned fracking they have begun to import lots of US liquid natural gas. The first LNG exports in the lower United States date only to 2016 but since that time exports have increased dramatically to China and Europe and the US will be the world’s largest exporter of LNG by the end of 2022.
European Commission: The European Union imports more and more liquefied natural gas (LNG) from the United States to diversify and render its energy supply more secure. LNG imports from the U.S. have increased substantially since the first shipment in April 2016. Data show that at the end of 2019 LNG exports to the EU recorded the highest volume ever. In November 2019 imports reached 3 billion cubic meters and their value was estimated at €0.5 billion. In December 2019 LNG imports from the US reached a new monthly record: 3.2 billion cubic meters, with an estimated value of €0.5 billion.
European imports have only increased since that time as Europe has shut down nuclear reactors and the price of European energy has soared. A Russian invasion of Ukraine could increase US demand even more.
All hail the fracking revolution.
How animals decide
Almost all animals must make decisions on the move. Here, employing an approach that integrates theory and high-throughput experiments (using state-of-the-art virtual reality), we reveal that there exist fundamental geometrical principles that result from the inherent interplay between movement and organisms’ internal representation of space. Specifically, we find that animals spontaneously reduce the world into a series of sequential binary decisions, a response that facilitates effective decision-making and is robust both to the number of options available and to context, such as whether options are static (e.g., refuges) or mobile (e.g., other animals). We present evidence that these same principles, hitherto overlooked, apply across scales of biological organization, from individual to collective decision-making.
That is recent work by Vivek H. Sridhar, et.al. And for the pointer I thank Clara.
The new consensus of economists is further to the left
Based on an extensive survey of the members of the American Economic Association this paper compares consensus among economists on a number of economic propositions over four decades. The main result is an increased consensus on many economic propositions, specifically the appropriate role of fiscal policy in macroeconomics and issues surrounding income distribution. Economists now embrace the role of fiscal policy in a way not obvious in previous surveys and are largely supportive of government policies that mitigate income inequality. Another area of consensus is concern with climate change and the use of appropriate policy tools to address climate change.
That is from a new paper by Doris Geide-Stevenson and Alvaro La Parra Perez. While I believe left-wing economists are more likely to answer such surveys (and maybe this gap is growing over time?), still I do not doubt the essential correctness of this result. Note also that immigration and floating exchange rates remain popular, tariffs remain unpopular.
Via Jeremy Horpedahl.
What has Jasper Johns done for us lately?
What has Johns done for us lately? Pretty much what he did for us in the first place: he continually disrupts the mental shorthand that converts complex visual experience into simpler mental categories, with all their buttressing opinions, received wisdom, and personal preferences. In a world (including the art world) where “visuals” are used to simplify arguments and kindle beliefs, Johns reminds us that doubling, bifurcation, and uncertainty are the terms of vision itself.
That is from Susan Tallman in the New York Review of Books. Happy New Year everybody!
Friday assorted links
Ethnic discrimination on Airbnb
We use data from Airbnb to identify the mechanisms underlying discrimination against ethnic minority hosts. Within the same neighborhood, hosts from minority groups charge 3.2 percent less for comparable listings. Since ratings provide guests with increasingly rich information about a listing’s quality, we can measure the contribution of statistical discrimination, building upon Altonji and Pierret (2001). We find that statistical discrimination can account for the whole ethnic price gap: ethnic gaps would disappear if all unobservables were revealed. Also, three-quarters (2.5 points) of the initial ethnic gap can be attributed to inaccurate beliefs of potential guests about hosts’ average group quality.
That is from a newly published paper (AEA) by Morgane Laouénan and Roland Rathelot.
The mental health benefits of vaccines
We estimate that COVID-19 vaccination reduces anxiety and depression symptoms by nearly 30%. Nearly all the benefits are private benefits, and we find little evidence of spillover effects, that is, increases in community vaccination rates are not associated with improved anxiety or depression symptoms among the unvaccinated. We find that COVID-19 vaccination is associated with larger reductions in anxiety or depression symptoms among individuals with lower education levels, who rent their housing, who are not able to telework, and who have children in their household. The economic benefit of reductions in anxiety and depression are approximately $350 billion. Our results highlight an important, but understudied, secondary benefit of COVID-19 vaccinations.
Here is the NBER working paper by Virat Agrawal, Jonathan H. Cantor, Jeeraj Sood, and Christopher M. Whaley.
NBA fact of the day
As the omicron variant rips through NBA players and coaches, it has reached a season-high among game officials: 36% of the league’s referees are in COVID-19 protocols, sources told ESPN on Thursday.
Here is the full ESPN story. Unlike most Americans, NBA refs are tested on a regular basis.
Thursday assorted links
1. Spotify playlist for my classical music picks.
2. How Chinese eating habits have changed.
4. Covid severity much lower in Gauteng. About 1/4 of the death rate from Delta there.
5. “The more someone shops online rather than in stores, the less inflation the individual has faced.” Austan Goolsbee on the missing inflation data, and the NYT uses a photo of Rainier cherries.
The Jeff Holmes Conversation with Tyler Cowen
Jeff is the CWT producer, and it has become our custom to do a year-end round-up and summary. Here is the transcript and audio and video. Here is one excerpt:
HOLMES: …Okay, let’s go through your 2011 list really quickly.
COWEN: Sure.
HOLMES: All right, number one — in no particular order, I think — but number one was Incendies. Do you remember what that’s about?
COWEN: That is by the same director of Dune.
HOLMES: Oh, is that Denis Villeneuve?
COWEN: Yes, that’s his breakthrough movie. It’s incredible.
HOLMES: I didn’t know that. I’d never heard of it. French Canadian movie, mostly set in Lebanon.
COWEN: Highly recommended, whether or not you like Dune. That was a good pick. It’s held up very well. The director has proven his merits repeatedly, and the market agrees.
HOLMES: I’m a fan of Denis Villeneuve. Obviously, Arrival was great. I can’t think of the Mexican drug movie off the top of my head.
COWEN: Is it Sicario?
HOLMES: Sicario — awesome.
COWEN: It was interesting, yes.
HOLMES: He is one of the only directors today where, when he now makes something, I know I will go and see it.
COWEN: Well, you must see Incendies. So far, I’m on a roll. What’s next?
HOLMES: All right, number two: Uncle Boonmee Who Can Recall His Past Lives.
COWEN: Possibly the best movie of the last 20 years. I’m impressed by myself. It’s a Thai movie. It’s very hard to explain. I’ve seen it three times since. A lot of other people have it as either their favorite movie ever or in a top-10 status, but a large screen is a benefit. If you’re seeing the movie, pay very close attention to its sounds and to the sonic world it creates, not just the images.
There are numerous interesting observations in the dialogue, including about some of the guests and episodes.
Self-recommended!
Watching economics on TikTok
For my latest Bloomberg column, I ran the experiment of typing “economics” into the TikTok search function, and here is what came up:
The first video I saw was about the high pay of economics majors in the job market, relative to softer majors. The speaker has a strange British accent, and it is possible that he was deliberately trying to look and sound stupid. It has been liked more than 32,000 times. The next was a rant about the outrageous price of beer at sporting events. There is no obvious intelligence or analysis in the video. It has been liked almost 32,000 times.
I also saw a video called “Why I left economics,” in which a student who took an economics class at Brown explains how his professor taught about inequality but lived in a mansion with servants. He argues that economics as a subject distracts our attention from “what the **** we’re supposed to do.” The number of likes exceeds 258,000.
I watched a video of a woman loudly sighing in relief as a caption explains she has just dropped her economics class. Likes: more than 22,000. Then there was one mocking the idea of being an economics major, calling it another religion and suggesting the demand for economist friends is quite low. It had more than 34,000 likes.
But I am not upset at TikTok:
I think of TikTok as a useful wake-up call for economists.
First, TikTok is one of the dominant modes of presenting and debating issues and ideas, including economics, yet it is hardly used or even discussed by professional economists. (University of Houston Professor Chris Clarke is a notable exception.) Economists are ignoring the market signals — to our own detriment.
Second, TikTok’s preoccupation with the status and morality of economics exists beyond TikTok. TikTok offers economists a view of ourselves as much of the world sees us. We are judged not for our analytics, but rather by how we fit into various moral codes. Like it or not, that is something we economists have to come to terms with. Maybe we should thank TikTok for making this so clear.
Recommended. And whether or not you like TikTok, you all should be spending a non-zero amount of time with it.
Wednesday assorted links
2. Composers fit “the small group theory.”
3. Mayda, Peri, and Steingress (AEA gate): “Our main contribution is to show that an increase in high-skilled immigrants decreases the share of Republican votes, while an inflow of low-skilled immigrants increases it.”
4. Paul Krugman on credibility, deficits, and inflation.
5. Half of the unvaccinated claim they wouldn’t take the Pfizer pill.