Monopoly power does not seem to be up at the actual market level

Using U.S. NETS data, we present evidence that the positive trend observed in national product-market concentration between 1990 and 2014 becomes a negative trend when we focus on measures of local concentration. We document diverging trends for several geographic definitions of local markets. SIC 8 industries with diverging trends are pervasive across sectors. In these industries, top firms have contributed to the amplification of both trends. When a top firm opens a plant, local concentration declines and remains lower for at least 7 years. Our findings, therefore, reconcile the increasing national role of large firms with falling local concentration, and a likely more competitive local environment.

That is from a new NBER working paper by Esteban Rossi-Hansberg, Pierre-Daniel Sarte, and Nicholas Trachter.

Call for Emergent Ventures proposals on talent search and major life changes

Here is my earlier description of Emergent Ventures.  In addition to the general request for proposals, we are looking to fund research in two particular directions, so if you are interested I would encourage you to apply here.  Here goes:

1. What do we know about the best ways to search for additional talent?  What features characterize successful talent searches?

2. How do people make “big” decisions?  This could include the decision to migrate from one country to another, the decision to change religions, the decision to start a new business, to marry, and so on.  Are there general principles here?  What is known or believed, either theoretically or empirically?

We are open as to what form a contribution might take, but as a default I am envisioning a paper (on either) of say 60-80 pp., surveying and conceptually summarizing academic literature, but written for very smart non-academics and with a somewhat practical bent.

I encourage you to apply, both on these topics and more generally.

My Conversation with Bruno Maçães

Here is the audio and transcript, here is the opening summary:

Political scientist Bruno Maçães has built a career out of crossing the globe teaching, advising, writing, and talking to people. His recent book, born out of a six-month journey across Eurasia, is one of Tyler’s favorites.

So how does it feel to face Tyler’s rat-a-tat curiosity about your life’s work? For Bruno, the experience was “like you are a politician under attack and your portfolio is the whole of physical and metaphysical reality.”

Read on to discover how well Bruno defended that expansive portfolio, including what’s missing from liberalism, Obama’s conceptual foreign policy mistake, what economists are most wrong about, how to fall in love with Djibouti, stagnation in Europe, the diversity of Central Asia, Hitchcock’s perfect movie, China as an ever-growing global force, the book everyone under 25 should read, the creativity of Washington, D.C versus Silicon Valley, and more.

Here is one bit:

MAÇÃES: This raises deep philosophical questions and political questions. If you want Turkey to become like Europe, then you have to project European power across Turkey. If Europe no longer has that ability, then you shouldn’t be surprised that Turkey looks elsewhere.

It’s very simple. I think I say in the book that in order to be loved, you also have to be feared. This idea that you find in Europe now, that without projecting any kind of power, other countries will be attracted to the European model, that’s a form of utopianism. I just cannot see that happen.

COWEN: So Europe lacks the spirit of adventure.

MAÇÃES: That is certainly the case. I think you see that. One of the areas where the spirit of adventure today is more relevant and important is technology. You see in Europe the idea that technology’s against us, and we should resist this rather than embrace it. A very negative spirit, which I think is a good example of how adventure has disappeared from the European psyche.

And:

COWEN: Russia. Why is Russia as a world power currently underrated?

MAÇÃES: The most impressive thing about Russia is, in fact, something that you might not think at first: the power of organization. We have this image of Russia as a failed state in many respects.

But in order to keep that empire, in order to keep it together throughout the centuries, in order to develop it to some extent, in order to bring together so many ethnicities, so many religions . . . it’s fair to say that Russia has done a better job of integrating its Muslim population, which is close to 15 percent, than any other country, I would argue — certainly any other major country.

The power of the Russian state, the ability to organize, to dispose, to connect, is one of the great political stories of mankind — to see how the Russian state was able to grow and to extend itself. And that’s still there.

Original and highly recommended.  Again, here is Bruno’s book The Dawn of Eurasia: On the Trail of the New World Order.

Wednesday assorted links

What I’ve been reading

1. Santiago Levy, Under-Rewarded Efforts: The Elusive Quest for Prosperity in Mexico.  Probably the best current book on Mexico’s economy and why it has not grown more rapidly.  Most of all, Levy blames misallocation, and more specifically the attachment of too many workers to the low-productivity informal sector.  The author notes (p.34) that both the top 20 percent of the wage distribution, or even the top 1 percent, saw no wage growth from 1996 to 2015.

2. Sriya Iyer, The Economics of Religion in India.  A useful survey, which delivers on what the title promises.

3. Howard Sounes, Fab: An Intimate Life of Paul McCartney.  One of my favorite biographies, this book is also excellent on outlining the history of the Beatles (and subsequent McCartney groups) as problems in the theory and practice of management.  I now have ordered the author’s other books on music history.

4. Jeffrey D. Sachs, A New Foreign Policy: Beyond American Exceptionalism.  This book is somewhat less radical than I had been expecting, mostly concentrating on the potential gains from multilateralism, international cooperation, and international law.  Or is that the truly radical view?

5. Roger Scruton, Music as an Art.  The chapter on Schubert is the highlight, and perhaps the best explanation of that composer’s beauty and importance.  The book is otherwise high variance, with the remarks on morals and aesthetic philosophy much weaker.  At times he pops open an insight when it is least expected, such as on heavy metal music: “In the realm of pop they were the modernists, undergoing in their own way that revolution against kitsch and cliche that had set Schoenberg and Adorno on the path towards 12-tone serialism.”

Helene Rosenblatt, The Lost History of Liberalism: From Ancient Rome to the Twenty-First Century, presents liberals as moralists and debunks the notion of liberalism as so exclusively an Anglo-American phenomenon.

Dean Keith Simonton, The Genius Checklist: Nine Paradoxical Tips on How You! Can Become a Creative Genius, is a popularization of some of his earlier research on genius and creative achievement.

Notable is Stephen L. Carter’s new biography of his grandmother, Invisible: The Forgotten Story of the Black Woman Lawyer Who Took Down America’s Most Powerful Mobster.

Climate change may be more expensive than we think

That is the topic of my latest Bloomberg column, here is the closing bit:

I am struck by the costs of climate change suggested in the UN’s Intergovernmental Panel on Climate Change report, hardly a source of denialism. Its cost estimate — “1 to 5% of GDP for 4°C of warming” — is relatively reassuring. After all, global GDP is right now growing at more than 4 percent a year. If climate change cost “only” 4 percent of GDP on a one-time basis, then the world economy could make up those costs with less than a year’s worth of economic growth. In essence, the world economy would arrive at a given level of wealth about a year later than otherwise would have been the case. That sounds expensive but not tragic.

Unfortunately, that is not the right way to conceptualize the problem. Think of the 4 percent hit to GDP, if indeed that is the right number, as a highly unevenly distributed opening shot. That’s round one, and from that point on we are going to react with our human foibles and emotions, and with our

highly imperfect and sometimes corrupt political institutions. (Libertarians, who are typically most skeptical of political solutions, should be the most worried.)

Considering how the Syrian crisis has fragmented the EU as well as internal German politics, is it so crazy to think that climate change might erode international cooperation all the more? The true potential costs of climate change are just beginning to come into view.

Get your money for nothin’ get your chicks for free

The manager of Dire Straits earned a percentage of their royalties and he’s selling a big chunk of it to the public. For $3,970–a little cheaper if you buy in bulk–you can get 1/925 of an asset which has been paying around $296,992 per year over the last year for an annual return of about 8%* (corrected from earlier)–that’s pretty good and the prospectus argues that growth in streaming and a forthcoming Mark Knopfler tour will increase royalties.

I think it would be pretty cool to hear Sultans of Swing on the radio and shout “turn it up!” because you knew were earning but only accredited investors need apply. In related news Matt Levine has an excellent piece on accredited investor rules and his alternative:

  • Anyone can also invest in any other dumb investment; you just have to go to the local office of the SEC and get a Certificate of Dumb Investment. (Anyone who sells dumb non-approved investments without requiring this certificate from buyers goes to prison.)
  • To get that certificate, you sign a form. The form is one page with a lot of white space. It says in very large letters: “I want to buy a dumb investment. I understand that the person selling it will almost certainly steal all my money, and that I would almost certainly be better off just buying index funds, but I want to do this dumb thing anyway. I agree that I will never, under any circumstances, complain to anyone when this investment inevitably goes wrong. I understand that violating this agreement is a felony.”
  • Then you take the form to an SEC employee, who slaps you hard across the face and says “really???” And if you reply “yes really” then she gives you the certificate.
  • Then you bring the certificate to the seller and you can buy whatever dumb thing he is selling.

Do moving and making big decisions tend to happen together?

We use exogenously determined, long-distance relocations of U.S. Army soldiers to investigate the impact of moving on marriage. We find that marriage rates increase sharply around the time of a move in an event study analysis. Reduced form exposure analysis reveals that an additional move over a five year period increases the likelihood of marriage by 14 percent. Moves increase childbearing by a similar magnitude, suggesting that marriages induced by a move are formed with long-term intentions. These findings are consistent with a model where the marriage decision is costly and relocation lowers the costs to making this decision. Our results have implications for understanding how people make major life decisions such as marriage, as well as the cost of migration.

That is from a new paper by Susan Payne Carter and Abigail Wozniak.  It’s as if the move jolts you out of complacency and activates your long-term planning modules.  Here are some bits from the paper, as assembled by an MR reader:

– …marriage rates rise sharply shortly before and in the first two months after a move.
– Additional moves encourage marriage, raising the likelihood of marriage and of having children present as dependents.
– The likelihood of marrying prior to five years of Army service rises by 8 percentage points with an additional domestic move, representing an increase of 14 percent from the mean marriage rate.
– We first considered a model in which relocation likely requires investment in thinking about long-term plans that may simultaneously lower the cost of considering other types of long-term commitments, like marriage.
– This suggests that the decision to marry may be affected by other events requiring long-term planning. This in turn implies that a disruptive event, like a relocation, may actually strengthen family ties rather than strain them.

For the pointers I thank two MR readers.

Reihan Salam on the immigration crisis

Here is Reihan in the WSJ (good photos!):

…we need to recognize that the immigration debate isn’t really about immigrants. In truth, it’s about the children of immigrants.

…Like it or not, we are a country with an implicit social contract. If we welcome you in as part of the flock, we also welcome your offspring. In past eras, high immigration levels were matched by high native birthrates. The end result was that, even if immigrants had large families, these second-generation youth were greatly outnumbered by the descendants of the native-born. Investing in the next generation meant investing in the children of immigrants, yes, but also in the children of natives, who, by virtue of their numbers, would set the cultural tone.

Collapsing native birthrates have changed the picture, setting off a cultural panic among the likes of Rep. Steve King, the Iowa congressman who infamously tweeted, “We can’t restore our civilization with somebody else’s babies.”

Here is Reihan’s new book Melting Pot or Civil War?: A Son of Immigrants Makes the Case Against Open Borders.  Here is Katie’s sketch of my blurb:

Out today, and definitely recommended!

World War II and African American Socioeconomic Progress

Here is a job market paper from Andreas Ferrara, University of Warwick:

This paper argues that the unprecedented socioeconomic rise of African Americans at mid-century is causally related to the labor shortages induced by WWII. Results from combining novel military and Census data in a difference-in-differences setting show that counties with an average casualty rate among semi-skilled whites experienced a 13 to 16% increase in the share of blacks in semi-skilled jobs. The casualty rate also has a significant reduced form effect on cross-state migration, wages, home ownership, house value, and education for blacks. Using survey data from 1961, IV regression results indicate that the economic upgrade, which is instrumented with the semi-skilled white casualty rate, is also associated with an increase in social status. Both black and white individuals living in treated counties are more likely to have an interracial friendship, live in mixed-race neighborhoods, and to have reduced preferences for segregation.

Via John Holbein.

Syverson on Productivity

The FRB of Richmond has a great interview with Chad Syverson:

EF: Some have argued that the productivity slowdown since the mid-2000s is due to mismeasurement issues — that some productivity growth hasn’t been or isn’t being captured. What does your work tell us about that?

Syverson: It tells us that the mismeasurement story, while plausible on its face, falls apart when examined. If productivity growth had actually been 1.5 percent greater than it has been measured since the mid-2000s, U.S. gross domestic product (GDP) would be conservatively $4 trillion higher than it is, or about $12,000 more per capita. So if you go with the mismeasurement story, that’s the sort of number you’re talking about and there are several reasons to believe you can’t account for it.

First, the productivity slowdown has happened all over world. When you look at the 30 Organization for Economic Co-operation and Development countries we have data for, there’s no relationship between the size of the measured slowdown and how important IT-related goods — which most people think are the primary source of mismeasurement — are to a country’s economy.

Second, people have tried to measure the value of IT-related goods. The largest estimate is about $900 billion in the United States. That doesn’t get you even a quarter of the way toward that $4 trillion.

Third, the value added of the IT-related sector has grown by about $750 billion, adjusting for inflation, since the mid-2000s. The mismeasure­ment hypothesis says that there are $4 trillion missing on top of that. So the question is: Do we think we’re only getting $1 out of every $6 of activity there? That’s a lot of mismeasurement.

Finally, there’s the difference between gross domestic income (GDI) and GDP. GDI has been higher than GDP on average since the slowdown started, which would suggest that there’s income, about $1 trillion cumulatively, that is not showing up in expenditures. But the problem is that was also true before the slowdown started. GDI was higher than GDP from 1998 through 2004, a period of relatively high-productivity growth. Moreover, the growth in income is coming from capital income, not wage income. That doesn’t comport with the story some people are trying to tell, which is that companies are making stuff, they’re paying their workers to produce it, but then they’re effectively giving it away for free instead of selling it. But we know that they’re actually making profits. We might not pay directly for a lot of IT services every time we use them, but we are paying for them indirectly.

As sensible as the mismeasurement hypothesis might sound on its face, when you add up everything, it just doesn’t pass the stricter test you would want it to survive.

And he makes an excellent point about the potential productivity growth from AI

…it seems that with some fairly modest applications of AI, the produc­tivity slowdown goes away. Two applications that we look at in our paper are autonomous vehicles and call centers.

About 3.5 million people in the United States make their living as motor vehicle operators. We think maybe 2 million of those could be replaced by autonomous vehi­cles. There are 122 million people in private employment now, so just a quick calculation says that’s an additional boost of 1.7 percent in labor productivity. But that’s not going to happen overnight. If it happens over a decade, that’s 0.17 percent per year.

About 2 million people work in call centers. Plausibly, 60 percent of those jobs could be replaced by AI. So when you do the same kind of calculation, that’s an additional 1 percent increase in labor productivity; spread out over a decade, it’s 0.1 percent per year. So, from those two applica­tions alone, that’s about a quarter of a percent annual accel­eration for a decade. So you only need maybe six to eight more applications of that size and the slowdown is gone.

Read the whole thing. There’s no fluff in this interview. Syverson packs every answer with substantive content.

Claims about alcohol

From Tom McKay at Gizmodo:

Alcohol is responsible for over one in 20 of all deaths worldwide, according to the most recent edition of a World Health Organization (WHO) report that comes out every four years.

The Guardian writes that the report found that roughly three million deaths in 2016 can be attributed to alcohol, of which 2.3 million were men and 29 percent were caused by injuries (including everything from accidents to car collisions and suicides) rather than health problems. Other recorded causes of death included digestive disorders (21 percent) and cardiovascular diseases (19 percent), as well as “infectious diseases, cancers, mental disorders” and other conditions caused by alcohol intake, CNN added.

According to the WHO data, approximately 7.2 percent of premature deaths worldwide are linked to alcohol, and as well as 5.3 of all deaths in general.

Obviously murky and multiple causalities will make any of these numbers debatable.  Still, I guess this explains why debates over alcohol so command the headlines these days and make alcohol the number one social issue?