What are the limits of economies of scope?
Amazon is launching its first high-tech hair salon, as the online retailer makes a surprise move into the beauty sector.
The salon, in Spitalfields, east London, will have an augmented-reality mirror showing clients different colours and styles before treatments.
The venue will also have magazines loaded on to tablets, for browsing.
Traditional services including cuts, blow-dries and colour treatments will also be available.
Here is the full story, via Michelle Dawson.
Is this really better than borrowing?
Or how about a VAT?
President Joe Biden will propose almost doubling the capital gains tax rate for wealthy individuals to 39.6%, which, coupled with an existing surtax on investment income, means that federal tax rates for investors could be as high as 43.4%, according to people familiar with the proposal.
The plan would boost the capital gains rate to 39.6% for those earning $1 million or more, an increase from the current base rate of 20%, the people said on the condition of anonymity because the plan is not yet public. A 3.8% tax on investment income that funds Obamacare would be kept in place, pushing the tax rate on returns on financial assets higher than the top rate on wage and salary income, they said.
Here is the full story from Bloomberg. Given state rates, that means over 50% in New York and California — is that what the science recommends?
Thursday assorted links
A Foreign Policy Disaster in the Making
NYTimes: A lethal, fast-paced second wave of the coronavirus pandemic has brought India’s health care systems to the verge of collapse and is putting millions of lives and livelihoods at risk.
On Sunday and Monday, the country recorded more than 270,000 and 259,000 cases, respectively, of Covid-19, a staggering increase from about 11,000 cases per day in the second week of February. Reported coronavirus infections shot up from about 20,000 per day in mid-March to more than 200,000 by mid-April.
The newspapers and social media are scrolls of horror and failure of the health system. There are reports of lines of ambulances with patients waiting outside the largest Covid facility in Ahmedabad in the western state of Gujarat because ventilator beds and oxygen had run out.
On Friday in the northern city of Lucknow, Vinay Srivastava, a 65-year-old journalist, shared his falling oxygen levels on Twitter, tagging government authorities for help. Overburdened hospitals and laboratories wouldn’t take calls from his family. The last tweet from Mr. Srivastava’s handle described his oxygen saturation level at 52, way below the 95 percent, which is considered normal. Nobody helped. He died on Saturday.
When I left India in February of 2020 I feared that COVID would rip through its dense, urban populations which were already under stress from some of the world’s worst air and water pollution. I feared that COVID would overwhelm India’s weak public health care system and leave its low-capacity state flailing. As it happened, I should have worried more about America’s poorly cared for nursing home populations, its high obesity rate, and its low state-capacity. It was the US state that ended up flailing, as it and the public became absorbed by media spectacles, impeachments and scandals du jour even as thousands died daily. The virus mocks us all.
All of this will require some rethinking. Today, however, I want to point to a foreign policy disaster in the making. America’s role as the guarantor of a globalized, mostly peaceful, and orderly world–already deeply hurt by four years of “America First,”–is now under further threat by an increasing perception that we are vaccine hoarders. Conspiracy theories are running wild in India on WhatsApp and elsewhere that we have hundreds of millions of spare doses. It isn’t true, of course. We ordered more doses than we needed because we didn’t know which vaccine would work and so we smartly placed multiple bets. Our advance-purchases from Pfizer and big investments in Moderna and related parts of the vaccine supply chain have paid off big time. As the US is vaccinated, our investments will benefit the entire world. Our investments in Novavax, AstraZeneca and Johnson and Johnson were also smart investments but those bets have yet to pay off in a big way. We don’t have hundreds of millions of doses stockpiled but maybe tens of millions of some AstraZeneca and Johnson and Johnson vaccines.
We have, however, used the Defense Production Act to prioritize American vaccine manufacturing at potentially great cost to India. As The Economist reports:
Production lines in India, making at least 160m doses of covid vaccine a month, will come to a halt in the coming weeks unless America supplies 37 critical items.
A shutdown of vaccine production in India would be a disaster for India and also for the United States. Our image in Asia will be tarnished at a time when we want to be making allies to counter Chinese influence. Moreover, the US benefits tremendously from a globalized world. Indeed, the US cannot supply its own vaccine needs without inputs from the rest of the world so flouting the rules will boomerang, leaving us and everyone else worse off. Autarchy is very bad for vaccine production.
The Biden Administration has some leeway. We have over 60 million doses of Pfizer and Moderna vaccines on hand and more arriving every day. We do not need to pause our own vaccination efforts to help others. We can donate what AstraZeneca stockpiles remain at no cost to us. A I said in my testimony to Congress, forget being humanitarians, there are health, economic and political reasons to vaccinate the world.
So let’s make it clear that we have an American plan to vaccinate the world before perceptions solidify that we are the villain and not the hero of the story.
Africa fact of the day
More than 1.7 million doses of the world’s first malaria vaccine have been administered in Ghana, Kenya and Malawi, benefitting more than 650,000 children!
Here is more.
Lucan’s *Civil War* is grossly underrated, and I found reading it to be a revelation
COWEN: Why does reading Lucan’s The Civil War make more sense in 2021 than it might have 30 years ago? To me, it seems remarkably contemporary — more than Virgil. People are crazy. They’re at each other’s throats, but not really for any good reason.
BARTSCH: Lucan seems contemporary. Lucan is very much after and in response to Virgil. He reads Virgil as saying the possibility of the good state, the good empire is a real thing. What Lucan says is, “No, that is never possible. There will always be men grubbing for power and killing each other, and civil war is, frankly, a condition of life, a condition of history. Right now, I’m writing under Nero, who is not a good emperor. I’m writing about the events that led to Nero coming to power, and I hate them. They’re terrible. People lie to each other. Brothers killed brothers. Friends slashed each other in the face, all for political reasons. People use language, again, incorrectly to distort what they meant, and then — here’s the rub — because I’m writing under Nero and because Nero is one of the bad emperors, I can’t complain about writing under Nero. I have to praise him. Otherwise, I’ll get in trouble.”
So you get this beautiful juxtaposition of a poet starting out his poem with almost over-the-top praise. “Oh, Nero, you’re going to heaven, and you’re going to be a star in the constellations. There’s never been anybody so wise as you. Civil war was worth it if you were the outcome.”
Then the rest of the poem is this blistering indictment of the present, which is the present under Nero. By indicting the present but praising Nero, he effectively shows us that his praise is false, but that false praise is what everybody has to engage in in a world where there’s no freedom. Maybe that is what seems topical to you. Or maybe it’s just about fake news, and you see Lucan is writing fake news in the beginning of his epic.
COWEN: I think the lack of obvious self-interested motivation for the polarization is what strikes me as so contemporary about Lucan. It’s not primarily about rent-seeking. There’s simply some logic of escalation that never stops. Now, maybe at the end of the poem, there’s a return to sanity in some ways, but there’s still this total immersion in violence, and the dynamics of that, the nonrationality or arationality — it struck me if I had read Lucan in 1991, I would have been quite puzzled, like this is something of antique interest. But I read it today — I’m not so pessimistic about the Western world, but it seems to hit much closer to home.
BARTSCH: Why is that? Sorry, you’re supposed to be asking me questions, but why does it seem to strike closer to home to you now?
COWEN: There seems to be a logic in contemporary politics where people take opposite sides of an issue because other people have taken a side. They don’t necessarily care anymore what it’s about. This may have moderated in the last few months, but there was a sense, if Trump tweeted some view about Turkey, some people would agree, and other people would take the other side, whether or not they had agreement about Turkey.
BARTSCH: Absolutely. The polarization of political views — that is completely in Lucan. Everything is binary. Both sides are at each other’s throats. The problem is, neither side is good. They’re just both opinionated. Yes, he constantly shows us horrible, meaningless scenes of butchery, which will never lead to anything meaningful. I think in that sense, yes, it’s an interesting comparison to what happens today.
Another interesting thing that he does is that, even though everything has been boiled down into them versus us — or actually them versus them because there’s nobody good in the epic except for Cato, who ends up dying — even as he takes on so serious a subject, he refuses to partake of its seriousness in a way. What I mean by that is that his battle scenes are ridiculous. They’re not realistic.
Here’s an example. You’re fighting for Julius Caesar, and you’re on a boat, and you’re trying to get onto a boat that belongs to Pompey, so you grab it with one arm as it comes by, but the people in Pompey’s boat chop off your arm. Then you grab it with your other arm, and then they chop that arm off. Then you’ve got no arms. So, what do you do? Well, Lucan says, you just lob yourself onto the boat armlessly and hope that you can make a difference that way. There’s arms and legs flying everywhere.
In Virgil or Homer, somebody stabs you, you groan, blood comes out, you die. In Lucan, you just bop around like a puppet losing limbs and legs. That’s very strange.
That is from my Conversation with Shadi Bartsch.
My excellent Conversation with Shadi Bartsch
She is a Professor of Classics at the University of Chicago, and recently published a translation of Virgil’s Aeneid. Here is the audio, visual, and transcript. Here is part of the summary:
Shadi joined Tyler to discuss reading the classics as someone who is half-Persian, the difference between Homer and Virgil’s underworlds, the reasons so many women are redefining Virgil’s Aeneid, the best way to learn Latin, why you must be in a room with a native speaker to learn Mandarin, the question of Seneca’s hypocrisy, what it means to “wave the wand of Hermes”, why Lucan begins his epic The Civil War with “fake news”, the line from Henry Purcell’s aria that moves her to tears, her biggest takeaway from being the daughter of an accomplished UN economist, the ancient text she’s most hopeful that new technology will help us discover, the appeal of Strauss to some contemporary Chinese intellectuals, the reasons some consider the history of Athens a better allegory for America than that of Rome, the Thucydides Trap, the magical “presentness” of ancient history she’s found in Italy and Jerusalem, her forthcoming book Plato Goes to China, and more.
Here is one excerpt:
COWEN: You may not agree with this, but many readers I speak with tend to think that Homer is somehow deeper, more mystical, or just more fun to read than Virgil. What accounts for that perception and how might you challenge it?
BARTSCH: I think they think that because both of Homer’s epics are not, per se, about politics or governments. They don’t offer etiologies of a state. They don’t talk about history. They are stories in the true sense. They are about heroes in the true sense, not about some guy who’s pushed around the world by the gods, constantly getting into trouble, crying, wishing he didn’t have to go found Rome, etcetera.
Achilles — figure larger than life. His pride is everything to him. He stops fighting in the Trojan War because he’s been insulted. The drama is, what compels him to go back into battle after that insult?
Odysseus — a fairy tale of a man wandering from island to island, meeting ever stranger creatures, but eventually making it back home. It’s a great yarn. You don’t have to learn history to read these. You get involved in the psychology of the characters, their tragedies and their triumphs.
Nobody is really interested in getting involved in the psychology of the state and its triumphs. On the one hand, you’ve got a poem that’s an etiology for a particular government. On the other hand, you have two amazing stories. I can see how reading The Aeneid would be considered duller for some.
Excellent throughout, and again here is Shadi’s excellent translation of Virgil’s Aeneid.
Wednesday assorted links
The petition that is French
A survey of more than 2,600 industry professionals by the Union of Oenologists showed that among those who had caught COVID-19, more than a third said the disease had affected their ability to do their work. Some student wine tasters had dropped out of courses after falling ill with the virus, the union said.
Union boss Didier Fages said the body had written to President Emmanuel Macron and Prime Minister Jean Castex to ask that wine tasters be moved to the front of the queue for anti-COVID shots to safeguard livelihoods.
Here is the full story.
Are young or old lives worth more?
Jeremy Horpedahl and Bryan Caplan debate this topic, with Jeremy pointing out that older, wealthier people can have just as high a willingness to pay to reduce risk, if not higher.
In all things Covid I usually agree with Jeremy, though in this case I side with Bryan’s conclusion (though he doesn’t explain well why he is correct).
For purposes of simplicity, let us consider purely selfish individuals and move to the case where the “p” of death will be equal to one if the “risk” is not avoided. And make capital markets perfect. Then both young and old will then pony up the full value of their prospective human capital to avoid death. The lives with more human capital will be worth more, at least according to economic standards. Young lives usually will be worth more than old lives, though of course highly productive older people might count for more if the higher productivity outweighs the smaller number of years left. You might prefer to save fifty-year-old Thomas Schelling over the life of a forty-year-old who is doing less.
This is so far quite intuitive, again noting these are economic judgments not final moral judgments (which will be more contentious and bring in many additional considerations). Furthermore, you can scale down these numbers, and adjust for risk-aversion, to cover mortality risks much lower than p = 1.
Now consider some older people who have a lot of wealth but very little human capital. These (selfish) individuals still will pay a lot to avoid death or risk of death, but in essence there is an externality. They treat their wealth as “disappearing with their death” when in reality that wealth simply is transferred to others. Therefore they overspend to keep themselves around on planet earth, and they will overpay for risk reduction.
So the lives of high wealth, low human capital individuals, including older individuals, are overweighted by traditional economic metrics, given that “naive” WTP measures do not adjust for the “wealth transfer upon death” externality. That is some but by no means all of the elderly. Their willingness to pay for risk reduction may be as high as the WTP of the young, but in social terms that does not mean their lives are equally valuable.
In sum, check your WTP calculations against human capital intuitions.
The first version of this argument appeared in my dissertation, though it has surfaced a few times since, including in some QJE pieces.
And if you would like some homework for your spare time, try solving for the conditions under which selfish individuals, but living in families, can make intra-family trades to internalize these wealth transfer externalities.
Tuesday assorted links
1. MIE: Used AmEx card of Michael Jordan sells for 3k.
4. MIE: putting product placement in old classic movies.
5. Promising Young Woman is indeed a very good movie, at times hard to watch, and most of the reviews are either inarticulate or uncomprehending because few are willing to grasp and explain (part of) what makes it so interesting.
How will crypto wealth transform philanthropy?
That is the topic of my latest Bloomberg column, here is one excerpt:
If the price of Bitcoin were to reach $200,000, Coinbase Chief Executive Officer Brian Armstrong observed recently, half of the world’s billionaires would be crypto billionaires. Even at the lesser valuations that currently prevail, this crypto wealth has vast potential to reshape philanthropy. Expect a relative decline in the influence of longstanding nonprofit institutions — and more weird, stand-alone projects.
Bitcoin itself is a weird, stand-alone project. The true identity of its inventor, Satoshi Nakamoto, is still unknown, and the broader Bitcoin ecosystem is not owned or controlled by any company or institution. It has been self-sustaining since the beginning, and so it should hardly come as a surprise that Bitcoin billionaires take Bitcoin itself as a model for future institutions, including in philanthropy.
As philanthropists, Bitcoin and other crypto billionaires will likely look to support ideas that can launch in a dramatic way and quickly acquire escape velocity. They are unlikely to fund the ongoing labor costs of established cultural institutions.
Bitcoin and many other cryptocurrencies seem designed to stand independent of any government or mainstream financial institution. That too suggests that the philanthropic emphasis of crypto wealth will be on non-establishment, non-governmental organizations.
And:
Venture capitalist Paul Graham has pointed out that wealth is earned much more quickly nowadays, and that is all the more true in crypto, which after all is only 12 years old. Unlike many of the wealthy people in law or investment banking, these are not people who had to spend their lives working their way up, finally achieving a top position in their 60s. They either are founders of rapidly growing and scaling companies, or they bought large sums of the right crypto assets early on, or both. Either way, their temperaments are geared to expect immediate action and rapid results.
Nonprofits will have to adjust accordingly, even though speed is not typically their comparative advantage. That in turn suggests that the organizational structures of many nonprofits will have to change fairly radically. Many of them were designed or have evolved to be good at continuity, like the Cleveland Symphony Orchestra, which after all is still playing Beethoven with violins and cellos.
There is much more at the link.
Isaiah Andrews wins the John Bates Clark medal
Here is the announcement. Here is his home page. Here is scholar.google.com for him. Congratulations!
Vox on BLM
VOX: From 2014 to 2019, Campbell tracked more than 1,600 BLM protests across the country, largely in bigger cities, with nearly 350,000 protesters. His main finding is a 15 to 20 percent reduction in lethal use of force by police officers — roughly 300 fewer police homicides — in census places that saw BLM protests.
Campbell’s research also indicates that these protests correlate with a 10 percent increase in murders in the areas that saw BLM protests. That means from 2014 to 2019, there were somewhere between 1,000 and 6,000 more homicides than would have been expected if places with protests were on the same trend as places that did not have protests. Campbell’s research does not include the effects of last summer’s historic wave of protests because researchers do not yet have all the relevant data.
…One other possible explanation for the increased murder rate is that law enforcement officials are the ones voluntarily reducing their interactions with the community and as a result emboldening criminal activity. One way to observe whether police are reducing their efforts is to see whether the share of property crimes cleared falls over this period. In other words, are police not trying as hard — either because they are demoralized or angry at public scrutiny of their behavior — to solve low-level crimes that are reported to them? Campbell observes a 5.5 percent decline in the share of property crimes cleared, which is consistent with police reducing their efforts immediately following the protests.
Based on this paper. The explanation is consistent with what happened in Baltimore after the Freddie Gray protests and riots, namely arrests went down and murders went up.
What should I ask Richard Prum?
I will be doing a Conversation with him, here is part of his Wikipedia page:
Richard O. Prum (born 1961) is William Robertson Coe Professor of Ornithology, and Head Curator of Vertebrate Zoology at the Peabody Museum of Natural History at Yale University.
Prum describes himself as “an evolutionary ornithologist with broad interests in diverse topics,” including phylogenetics, behavior, feathers, structural coloration, evolution and development, sexual selection, and historical biogeography.
Prum holds that birds are the living descendants of theropod dinosaurs, a once disputed finding that is now almost universally accepted in the ornithological and evolutionary biology scientific communities.
Prum grew up in rural Vermont and took his bachelor’s degree at Harvard in 1983, and received his Ph.D. in 1989 from the University of Michigan. After gradually losing his hearing throughout the early 1990s due to illness, Prum moved from primarily doing field work to conducting research on plumage pigmentation, feather evolution, and Darwin‘s sexual selection theory. He released a book in 2017 on the role of beauty in natural selection: The Evolution of Beauty: How Darwin’s Forgotten Theory of Mate Choice Shapes the Animal World – And Us.
So what should I ask him?