Friday assorted links
1. Country Time paying kids’ fines, lobbying for legalizing lemonade stands (link has video chatter on it).
2. 100 best drummers of all time? Listed at #98 is Karen Carpenter.
3. Let’s ask the astrologers about Libra!
4. David Henderson reviews *Big Business: A Love Letter to an American Anti-Hero*, you need to scroll down a wee bit.
5. The Brown Shoe case ugh, antitrust that makes no sense (NYT).
Labor market polarization and the fertility decline
In the years since the Great Recession, social scientists have anticipated that economic recovery in the United States, characterized by gains in employment and median household income, would augur a reversal of declining fertility trends. However, the expected post-recession rebound in fertility rates has yet to materialize. In this study, I propose an economic explanation for why fertility rates have continued to decline regardless of improvements in conventional economic indicators. I argue that ongoing structural changes in U.S. labor markets have prolonged the financial uncertainty that leads women and couples to delay or forgo childbearing. Combining statistical and survey data with restricted-use vital registration records, I examine how cyclical and structural changes in metropolitan-area labor markets were associated with changes in total fertility rates (TFRs) across racial/ethnic groups from the early 1990s to the present day, with a particular focus on the 2006–2014 period. The findings suggest that changes in industry composition—specifically, the loss of manufacturing and other goods-producing businesses—have a larger effect on TFRs than changes in the unemployment rate for all racial/ethnic groups. Because structural changes in labor markets are more likely to be sustained over time—in contrast to unemployment rates, which fluctuate with economic cycles—further reductions in unemployment are unlikely to reverse declining fertility trends.
That is from a new paper by Nathan Seltzer, via the excellent Kevin Lewis.
The politics of order in informal markets: Evidence from Lagos
That is the title of a new paper by Shelby Grossman, here is the abstract:
Property rights are important for economic exchange, but in much of the world they are not publicly guaranteed. Private market associations can fill this gap by providing an institutional structure to enforce agreements, but with this power comes the ability to extort from group members. Under what circumstances do private associations provide a stable environment for economic activity? Using survey data collected from 1,179 randomly sampled traders across 199 markets in Lagos, I find that markets maintain institutions to support trade not in the absence of government, but rather in response to active government interference. I argue that associations develop pro-trade institutions when threatened by politicians they perceive to be predatory, and when the organization can respond with threats of its own; the latter is easier when traders are not competing with each other. In order to maintain this balance of power, the association will not extort because it needs trader support to maintain the credibility of its threats to mobilize against predatory politicians.
Via Henry Farrell, that abstract reminds me of my earlier essay, and critique of libertarian anarchy, “Law as a Public Good,” shorter version of the argument here.
Glenn Loury Speaks
On a Thursday evening in April, Glenn Loury is talking about race, ethics, and affirmative action. And he’s getting emotional. “Don’t patronize my people,” he told an audience at the College of the Holy Cross, in Massachusetts. “Don’t judge us by a different standard. Don’t lower the bar! Why are you lowering the bar? What’s going on there? Is that about guilt or pity?” He let the question hang in silence for a moment. “Tell me a pathway to equality that is rooted in either one of those things.”
That’s the opening to a sharp and very candid interview of Glenn Loury by Evan Goldstein in the Chronicle of Higher Education. Loury continues on affirmative action:
Equality is the only legitimate long-term goal — racial equality, not head-counting. I’m talking about equality of dignity, respect, standing, accomplishment, achievement, honor. People have to earn these things. What do I want to do? I want to reorient the discussion around the development of African-American capacities to compete.
On his personal life:
Q: By the late 1990s, you’d broken with many former friends on the right. You’d undergone a political conversion. Where did you land?
A: There’s an arc to this thing, and it’s odd. I describe myself today as right of center.
What happened is that I went through a trauma. I was accused of assaulting a woman with whom I was having an extramarital affair. I was publicly humiliated. I had to withdraw an appointment as undersecretary of education in the last years of Reagan’s second term. I was a crack-cocaine addict; it almost killed me. My wife at the time, God bless her, stayed with me, and we subsequently had two fine sons. But at the time, I was dying.
I found Jesus. I got my life together.
Read the whole thing.
G. Warren Nutter and Chile
In 1969, Warren Nutter left the University of Virginia Department of Economics to serve as the Assistant Secretary of Defense for International Security Affairs in the Nixon administration. During his time in the Defense Department, Nutter was deeply involved in laying the groundwork for a military coup against the democratically elected president of Chile, Salvador Allende. Although Nutter left the Pentagon several months before the successful 1973 coup, his role in the ascendance of the Pinochet regime was far more direct than the better-known cases of Friedrich Hayek, Milton Friedman, James Buchanan, and Arnold Harberger. This paper describes Nutter’s role in Chile policy planning and generating a “coup climate.” It shows how Nutter’s criticisms of Henry Kissinger are grounded in his economics, and compares and contrasts Nutter with other economists who have been connected to Pinochet’s dictatorship.
That is a new paper by Daniel Peter Kuehn. You should note that Friedman and Buchanan have a truly scant connection to Pinochet and the coup (Harberger I do not know, Hayek was too skeptical of democracy in his thinking and informal remarks later in his life).
Claims about Iran (model this)
“Iran has probably arrived at the conclusion that it has less to lose from acting this way than from doing nothing,” Aniseh Tabrizi, a research fellow and Iran expert at London’s Royal United Services Institute, told CNBC via phone Tuesday.
“There is a gamble behind it that wasn’t there before, which is: ‘If other countries retaliate, we are willing to take the risk because we have really nothing to lose at this point’,” Tabrizi described. “And that is a dangerous way to feel.”
Iran’s economy is expected to shrink by 6% this year, after having contracted 3.9% last year, the International Monetary Fund says. By contrast, it clocked 3.8% growth in 2017, before the Trump administration re-imposed economic sanctions after withdrawing from the 2015 nuclear deal that offered the Islamic Republic relief from prior sanctions.
And:
“It’s all about careful calibration and plausible deniability,” Hussein Ibish, a senior resident scholar at the Arab Gulf States Institute in Washington, told CNBC.
Iran’s tactics, experts say, are designed to disrupt but not provoke a military response. So far, attacks have specifically avoided civilian deaths and environmental damage like an oil spill.
Instead, the Revolutionary Guard or its naval equivalent may be sending the message that it’s capable of undermining U.S. and Arab Gulf states’ interests in the region. And if they feel they can get away with it, it’s because they’re banking on President Donald Trump not wanting to actually start a war.
“Ultimately, Iran’s intention is to call President Trump’s bluff,” says Ibish.
I don’t have a clear view on this matter, but find it an interesting and of course important question. Here is more from Natasha Turak.
Currency manipulation doesn’t actually work so well
That is the topic of my latest Bloomberg column, here is one excerpt on the empirical side:
It is also worth keeping in mind a number of empirical points. First, the ECB has not historically been all that expansionary. Rather, it is renowned for a fairly tight monetary policy. Eurozone rates of price inflation are usually below 2%, and that does not seem about to change.
Second, up through the late 1990s, Chinese currency manipulation consisted of keeping the value of the currency “too high” rather than “too low.” Yet in those earlier times, Chinese exporters still were gaining ground. And since 2005, the Chinese currency has risen considerably — arguably, it has attained the levels one would expect in a normally adjusting market. More recently, the Chinese central bank may be propping up the currency, to limit capital flight from China. That is currency manipulation, but in a manner that will damage Chinese exports, not help them, and indeed China probably is headed toward having permanent trade deficits with the rest of the world.
Finally, countries with low household savings rates tend to run trade deficits, and of course that is the U.S., with savings rates usually below 10% and often as low as 4%. Obviously, if you spend most of your money, some of those expenditures will go abroad, and that will hurt your trade balance. Whether or not you think that is a problem, America’s savings shortfall has little to do with Chinese currency manipulation.
Of course President Trump and yes also Elizabeth Warren are the main offenders here. Read Warren’s Medium essay on these topics, it is shocking in its crude nationalism: “A Plan for Economic Patriotism.“
Thursday assorted links
1. Map of medieval trade routes.
2. Japanese TV show about working overtime, or trying not to (NYT).
3. Do the banks want Libra? (FT, gated, very good piece).
4. New pro-social media book and essay.
How to Become a Federal Criminal
Mike Chase, author of the excellent twitter feed @CrimeADay, has now written the illustrated handbook, How to Become a Federal Criminal. In truth, a handbook wasn’t necessary because it is very easy to become a federal criminal.
You may know that you are required to report if you are traveling to or from the United States with $10,000 or more in cash. Don’t hop over the Canadian border to buy a used car, for example, or the Feds may confiscate your cash (millions of dollars are confiscated every year). Di
d you also know that you can’t leave the United States with more than $5 in nickels??? That’s a federal crime punishable by up to five years in prison. How about carrying a metal detector in a national park–up to six months in prison. And God forbid you should use your metal detector and find something more than 100 years old, that can put you away for up to a year. Also illegal in a national park? Making unreasonable gestures to a passing horse.
The expansion of Federal criminal law into every nook and cranny of life can be amusing but there is a darker side.
The feds also have unbelievably powerful tools at their disposal. They can subpoena your bank records, listen to your phone calls, indict you in a secret proceeding called a grand jury, an, if they think you lied to them, they can charge you for that alone. Then, if you can get a jury to find you guilty on just one charge, the judges is allowed to sentence you up to the statutory maximum based on things you were never charged with, or even things a jury acquitted you of, so long as the judge decides you probably did them. (italics added).
Moreover, when anyone can be charged with a crime, the application of criminal law becomes discretionary and that discretion may be used to suppress the free exercise of other rights. Indeed, the recent Supreme Court case, Nieves v. Bartlett, makes it easier for the police to arrest people even if the reason for the arrest is retaliation for lawful behavior.
Slate: The First Amendment makes it unconstitutional for government officials to retaliate against you because they dislike your speech. At the same time, federal law gives you the right to sue state officials for compensation if they violate constitutional rights such as your right to free speech. But on Tuesday, the Supreme Court invented a rule that will often allow police officers to arrest people in retaliation for disfavored speech without liability.
….Because local laws are full of minor infractions, like “loitering,” that are frequently violated without incident, police will often have a pretext to arrest people engaged in speech the officers don’t like. By immunizing such abuse, Nieves may have devastating effects on demonstrators, press photographers, and anyone who wants to exercise their speech rights in public, like the right to film the police or verbally challenge officer misconduct. The power to arrest is a potent tool for suppressing speech because even if charges are later dropped, arrestees must undergo the ordeal—and dangers—of being booked and jailed, and they may have to disclose the arrest on future job and housing applications, among other ramifications.
Those new service sectors jobs — lots of ’em!
…we find that total employment rises substantially in industries with rising concentration. this is true even when we look at total employment of the smaller firms in these industries. This evidence is consistent with our view that increasing concentration is driven by new ICT-enabled technologies that ultimately raise aggregate industry TFP. It is not consistent with the view that concentration is due to declining competition or entry barriers…as those forces will result in a decline in industry employment.
That is from a new paper by Chang-Tai Hsieh and Esteban Rossi-Hansberg. The paper presents a larger picture too:
…the secular changes the U.S. economy has experienced for the last four decades…amount to a new industrialization process. One that allows firms to expand geographically and deliver its goods and services to customers locally. We have argued that this evolution was the result of an underlying technological change that led to reductions in variable costs (and establishment-level fixed costs) in exchange for larger firm-level fixed costs.
Recommended.
From the comments
Sometimes it does.
Sometimes it doesn’t.
Sometimes it does
Sometimes it doesn’t.
Here is the original post.
Wednesday assorted links
1. Collection of Victor Niederhoffer going up for sale.
2. The solar-powered salamander.
4. The new civility start-ups, by Alexandra Hudson.
5. Jameson Lopp on Libra. Recommended, if you care that is. And Craig Palsson’s video on Libra.
My Conversation with Hal Varian
Hal of course was in top form, here is the audio and transcript. Excerpt:
COWEN: Why doesn’t business use more prediction markets? They would seem to make sense, right? Bet on ideas. Aggregate information. We’ve all read Hayek.
VARIAN: Right. And we had a prediction market. I’ll tell you the problem with it. The problem is, the things that we really wanted to get a probability assessment on were things that were so sensitive that we thought we would violate the SEC rules on insider knowledge because, if a small group of people knows about some acquisition or something like that, there is a secret among this small group.
You might like to have a probability assessment of whether that would go through. But then, anybody who looks at the auction is now an insider. So there’s a problem in you have to find things that (a) are of interest to the company but (b) do not reveal financially critical information. That’s not so easy to do.
COWEN: But there are plenty of times when insider trading is either illegal or not enforced. Plenty of countries where it’s been legal, and there we don’t see many prediction markets in companies, if any. So it seems like it ought to have to be some more general explanation, or no?
VARIAN: Well, I’m just referring to our particular case. There was another example at the same time: Ford was running a market, and Ford would have futures markets on the price of gasoline, which was very relevant to them. It was an external price and so on. And it extended beyond the usual futures market.
That’s the other thing. You’re not going to get anywhere if you’re just duplicating a market that already exists. You have to add something to it to make it attractive to insiders.
So we ran a number of cases internally. We found some interesting behavior. There’s an article by Bo Cowgill on our experience with this auction. But ultimately, we ran into this problem that I described. The most valuable predictions would be the most sensitive predictions, and you didn’t want to do that in public.
And:
COWEN: But then you must think we’re not doing enough theory today. Or do you think it’s simply exhausted for a while?
VARIAN: Well, one area of theory that I’ve found very exciting is algorithmic mechanism design. With algorithmic mechanism design, it’s a combination of computer science and economics.
The idea is, you take the economic model, and you bring in computational costs, or show me an algorithm that actually solves that maximization problem. Then on the other side, the computer side, you build incentives into the algorithms. So if multiple people are using, let’s say, some communications protocol, you want them all to have the right incentives to have the efficient use of that protocol.
So that’s a case where it really has very strong real-world applications to doing this — everything from telecommunications to AdWords auctions.
And:
VARIAN: Yeah. I would like to separate the blockchain from just cryptographic protocols in general. There’s a huge demand for various kinds of cryptography.
Blockchain seems to be, by its nature, relatively inefficient. As an economist, I don’t like this proof of work that this is. I don’t like the fact that there’s one version of the blockchain that has to keep being updated. I don’t like the fact that it’s so slow. There are lots of things that you could fix, and I expect to see them fixed in the future, but I would say, crypto in general — big deal. Blockchain — not so much.
And finally:
COWEN: Now, users seem to like them both, but if I just look at the critics, why does it seem to me that Facebook is more hated than Google?
VARIAN: Well, you know, I actually don’t use Facebook. I don’t have any moral objection to it. I just don’t have the time to do it. [laughs] There are other things of this sort that can end up soaking up a substantial amount of time.
I think that one of the reasons — and this is, of course, quite speculative — I think that one of the reasons people are most worried about Facebook is they don’t really understand the limits of what can be done at Facebook. Whereas at Google, I think we’re pretty clear that we’re showing you ads. We’re showing you ads that are targeted to one thing or another, but that’s how the information’s used.
So, you’ve got this specific application in our case. In Facebook’s case, it’s more amorphous, I think.
There is much, much more at the link.
*One Giant Leap*
The author is Charles Fishman, and the subtitle is The Impossible Mission That Flew us to the Moon. Here is one excerpt:
It [NASA’s Mission Control] was the first real-time computing facility IBM had ever installed.
And:
…the Apollo flight computer was the first anywhere to have responsibility for human lives.
That computer had 73 kilobytes of memory and had 0.000002 percent of the computing capacity of an iPhone. And don’t forget this:
At least while you were headed outbound, you’d have plenty of fuel to correct things. Coming home from the Moon is a lot less forgiving. The heat of reentry, the splashdown targeting into the ocean, and the g-forces piling up on the spaceship and the astronauts inside combine to create a very thin slice of air you need to slide your spaceship into. The command module had just 1 degree of latitude on reentry. Too shallow an angle, and your space capsule skips off the top of the atmosphere like a flat stone — out into space and a wide orbit around the Earth, from which there was no rescue. Too steep a cut into the atmosphere, and the speed, heat, and g-forces would combine to incinerate your space capsule. And unlike on the way out, on the way back there are no go-arounds.
Definitely recommended, gripping from start to finish. Overall the best history of how the space revolution and the computer revolution were interconnected.
What I’ve been reading
1. Graeme D. Ruxton, Nature’s Giants: The Biology and Evolution of the World’s Largest Lifeforms. Picture books are underrated! They are like a better version of Wikipedia, and with glossy paper at that.
2. Neil Irwin, How to Win in a Winner-Take-All World: The Definitive Guide to Adapting and Succeeding in High-Performance Careers, is another excellent book by Neil Irwin, and it is both subtler and broader than the title alone would indicate.
3. Matthew Sadler and Natasha Regan, Game Changer: AlphaZero’s Groundbreaking Chess Strategies and the Promise of AI. Everything you wanted to know about AlphaZero and already have been asking, lots of games and illustrations but also lots of plain text. Definitely recommended, if you care that is. AlphaZero, by the way, never plays 1. e4, mostly because it sees 1…e5 in response as giving Black nearly equal chances.
4. John Brockman, editor, The Last Unknowns: Deep, Elegant, Profound UNANSWERED QUESTIONS About the Universe, the Mind, the Future of Civilization, and the Meaning of Life. My nominated question was: “How far are we from wishing to return to the technologies of the year 1900?” NB: you get only the questions, not the answers.
Leah A. Plunkett, Sharenthood: Why We Should Think Before We Talk About Our Kids Online, high time there has been a book with this message, and this is it.
Fiona MacCarthy, Gropius: The Man Who Built the Bauhaus also has plenty of interesting information about Alma Mahler, beyond what is in the Tom Lehrer song.
Chris Sagers, United States v. Apple: Competition in America, is a useful look at the antitrust case over eBook pricing, though the actual book does not start until p.79 or so.