Bitcoin Is a Bit of a Miracle at Any Price
That is the title of my latest Bloomberg column. Rather than giving you the main argument, let’s instead cut to the end:
The real story of bitcoin is a heartening one of community. Less than 10 years ago, the bitcoin asset was worth virtually nothing, but a small group of people believed in it and worked tirelessly to promote it, and now the whole world is watching. It’s a tale at least as old as Christ and the Apostles. Maybe the bitcoin believers are as much of a miracle story as that of the brilliant inventor Satoshi.
The thing is, I don’t always believe in miracle stories of community, not in these days of declining governance and possibly fraying social order. Yet I’ve become emotionally involved in tracking the bitcoin price, perhaps because I realize that if one such miracle of “ex nihilo” creation can be sustained, others are on the way. I don’t think bitcoin is a bubble, but every morning I wake up doubting.
More broadly the piece considers what should be the appropriate price for Bitcoin.
*Exact Thinking in Demented Times*
Where?, I hear you asking. No, that is the title of a new book by Karl Sigmund and the subtitle is The Vienna Circle and the Epic Quest for the Foundations of Science. I enjoyed this book very much, though I don’t recommend it as a balanced introduction to its chosen topic. I liked it best for its whims and interstices:
1. The mathematician Richard von Mises (brother of economist Ludwig) was a patron of Rilke, and he established a foundation for the sole purpose of supporting Robert Musil.
2. Carl Menger was planning on writing a philosophical treatise, and one which would have had a “Vienna Circle” anti-metaphysical slant.
3. Arguably Karl Popper learned the most from a polymathic cabinetmaker he was apprenticed to in his youth.
4. Friedrich Wieser had supported Mussolini, but a young Oskar Morgenstern, in his diary, complained that Wieser was too liberal.
5. Morgenstern later became a confirmed liberal, and he also remarked a few times that game theory was for the social sciences completing the research program of Kurt Gödel.
6. Karl Popper complained that Wittgenstein threatened him, in a lecture, with a poker. It is not obvious this was the case.
7. I came away from my read wanting to sample more Ernst Mach, more Moritz Schlick, and thinking Otto Neurath was perhaps badly underrated.
Note that most of the book is more serious than this, and less concerned with economists, much more with math and science and some psychoanalysis and positivism too.
Monday assorted links
Are corporate jets a waste of money?
Almost certainly not:
While shareholders have strong incentives to limit value-destroying perquisite consumption, it is challenging to identify such perquisites. Many corporate assets that enable forms of perquisite consumption also provide operational benefits. Corporate jets represent a potent example. We find business-related flights increase firm performance. Our results also highlight the channels through which jet use can either enhance or destroy firm value. Consistent with the benefits of information gathering and monitoring, firms with soft and complex information that is difficult to transmit remotely are more likely to fly to company subsidiaries and plants, and these flights positively affect firm value. In contrast, among firms with weak governance structures where flights are more likely motivated by agency factors, jet use is more likely to be value-decreasing. The ability to differentiate has important implications in today’s activism environment.
The full piece is by Lian Fen Lee, Michelle Lowry, and Susan Shu, via the excellent Kevin Lewis.
Occupational licensing is a barrier to interstate migration
…we find that the between-state migration rate for individuals in occupations with state-specific licensing exam requirements is 36 percent lower relative to members of other occupations. Members of licensed occupations with national licensing exams show no evidence of limited interstate migration.
That is from Janna E. Johnson and Morris E. Kleiner in the NBER working paper series. Here are ungated copies.
New Zealand fact of the day
…a recent report by Yale University concluded the country is suffering the highest rate of homelessness in the developed world with 40,000 people, nearly 1 per cent of the population, living on the streets or in emergency housing or substandard shelters.
…“The big change in homelessness is the number of working families struggling to find homes and pay rent,” says Ms Rutledge, who adds the situation is the worst she has seen in her 13 years working in homeless services in Auckland. Nationwide, some 5,844 people were on the social housing waiting list in September, a 42 per cent increase on the same month two years ago.
This FT article indicates the country will respond by banning foreign purchases of Kiwi homes — I guess the country is too crowded to allow for an elastic supply response.
What is up with the new Brexit deal?
Most of the Tories are happy they found a semi-workable version of the deal. They pay a big divorce bill to the EU, have a long transition period, opt for “regulatory standardization with the EU” for the whole UK, as enforced by the need to avoid a hard border in Ireland, and over the longer term end up with a customs union and free trade agreement of Norway-like nature.
In other words, they pay a lot of money, lose a seat at the table, and don’t significantly increase the policy autonomy of the country. In the subsequent bargaining over the details, the EU still holds most of the cards. Here are a few observations:
1. This represents an almost complete “fold” of the pro-Brexit stance, though like so many other political issues of the Anglo-American day it has become more about exerting one’s will over the opposition than achieving a very particular exit path or even outcome. One group in British society has won quite a major victory in symbolic terms, namely it has been shown that the country has agreed to leave.
2. At this point, the chance of Brexit being reversed in the short term is very slim. The anti-Brexit forces know that if this deal falls apart, they could end up with something much worse. That said, the chances of a medium-term reversal may be higher. Come the next election, it will still feel as if the UK is in the EU. The transition period could be extended, and then extended again. And then…
3. With the current deal, assuming it sticks, the chance of the UK itself unraveling is small.
4. The remaining pro-Brexit case is simply that the UK has limited its entanglement with the EU legal system and a possible future of full federal union. That’s worth something, but still I am pro-Remain.
5. Real estate in Northern Ireland remains significantly undervalued.
6. the EU really has shown it has a fairly strong and indivisible commitment to the “Four Freedoms,” on migration much more than I would have expected. You can debate whether this makes the rest of the union more or less stable over the longer term, but for sure it does one of those two things.
Sunday assorted links
1. Is Spotify leading us to the new Muzak? I fear yes, how 2017 is that?
2. “By the end of my first year in China, I feel as if I am a one-person FDA.”
3. Does algorithmic trading reduce information acquisition?
4. Are avocado injuries a thing of the past?
5. Yet more correct Ross Douthat, on the baker case but also on America more generally (NYT).
6. Glitches in the new tax legislation.
7. Andrew Batson’s music picks.
8. Fifteen-minute video explanation of the greatest chess game ever played, by AlphaZero of course. #Zugzwang
Why is Switzerland Peaceful?
Switzerland is a highly diverse society, especially among language groups, and with immigration it is becoming even more diverse. Yet Switzerland is also very peaceful. Why? The answer offered in this paper Good Fences created by geography, I find somewhat depressing. I would focus more on political decentralization as an explanation, that too is a function of geography but unlike geography it can be transplanted. I’m in Switzerland this week:
We consider the conditions of peace and violence among ethnic groups, testing a theory designed to predict the locations of violence and interventions that can promote peace. Characterizing the model’s success in predicting peace requires examples where peace prevails despite diversity. Switzerland is recognized as a country of peace, stability and prosperity. This is surprising because of its linguistic and religious diversity that in other parts of the world lead to conflict and violence. Here we analyze how peaceful stability is maintained. Our analysis shows that peace does not depend on integrated coexistence, but rather on well defined topographical and political boundaries separating groups, allowing for partial autonomy within a single country.
In Switzerland, mountains and lakes are an important part of the boundaries between sharply defined linguistic areas. Political canton and circle (sub-canton) boundaries often separate religious groups. Where such boundaries do not appear to be sufficient, we find that specific aspects of the population distribution guarantee either sufficient separation or sufficient mixing to inhibit intergroup violence according to the quantitative theory of conflict. In exactly one region, a porous mountain range does not adequately separate linguistic groups and that region has experienced significant violent conflict, leading to the recent creation of the canton of Jura. Our analysis supports the hypothesis that violence between groups can be inhibited by physical and political boundaries. A similar analysis of the area of the former Yugoslavia shows that during widespread ethnic violence existing political boundaries did not coincide with the boundaries of distinct groups, but peace prevailed in specific areas where they did coincide. The success of peace in Switzerland may serve as a model to resolve conflict in other ethnically diverse countries and regions of the world.
Early thoughts on aviation
There was the ever-present worry that aircraft would make war even more horrific. Some called for the international control of aviation to prevent its misuse. A few even advocated the complete destruction of all aircraft on the grounds that even civilian machines could be adapted for war.
…At the opposite end of the spectrum were the enthusiasts who expected that soon everyone would be able to fly their own personal aircraft…As early as 1928, Popular Mechanics predicted a car that could be turned into a helicopter, but most commentators thought the autogyro was a better bet — although it did need a short horizontal run before take-off…As late as 1971, Isaac Asimov was still expecting that VTOL [vertical take-off and landing system] machines would eventually take the place of automobiles.
That is from Peter J. Bowler, A History of the Future: Prophets of Progress from H.G.Wells to Isaac Asimov.
One thing I learned from this book is that “money crank” Frederick Soddy was an early prophet of nuclear power, before many others understood the potential. I am reminded of how “socialist crank” [oceans of lemonade with ships pulled by dolphins] Charles Fourier once prophesied that all of Europe would be tied together by railways.
A simple theory of gene-culture coevolution, with reference to immigration
Are there genetic vulnerabilities for depression across cultures?
Genetic vulnerability differs substantially from country to country. East Asian contexts, for example, show a high prevalence of genes associated with depression. Yet, despite these vulnerabilities, they develop fewer cases of the disorder. One hypothesis is that genetic vulnerabilities have co-evolved with culture, creating extra protective factors (in this case, extra interdependence). However, when these people leave their cultural contexts, they have a higher risk of developing depression.
That is an interview with Yulia Chentsova-Dutton, associate professor of psychology at Georgetown, and a researcher in this area. You can imagine further applications of this mechanism. The interview has other interesting points, for instance:
What is the role of emotion regulation?
Emotion regulation is increasingly becoming understood as a core factor in all affective disorders. In western societies, we don’t see enough adaptive strategies like reappraisal: learning to tell yourself a different story that would eventually lead to different emotions. There is also not enough social regulation of emotion, which occurs by sharing our emotions with others. Research shows that cultures can facilitate functional regulation strategies. For example, Igor Grossmann’s work shows that Russians make rumination (generally considered a dysfunctional strategy) more functional by encouraging people to ruminate about the self from another person’s perspective, making rumination almost reappraisal-like in its quality.
Do read the whole thing.
Saturday assorted links
*A Life of My Own*, by Claire Tomalin
This new memoir is one of my very favorite books of the year, and perhaps you recall Tomalin’s famous biographies of Hardy, Pepys, Dickens, Nelly Ternan, and Jane Austen. This time it is her life. The story is hard to excerpt, but here is one bit:
The day [for our lunch] came, and I realized I was feeling wobbly. I resolved to take no notice and things started well. We chatted and surveyed our menus. I chose fish, and even as I ordered it I knew it was a mistake. We talked on; I felt my stomach heave. I knew Vidia [Naipaul] to be the most fastidious of men. What should I do? I rose carefully to my feet, excused myself in a calm voice and said I would be back in a moment. I managed to make my way through it I ran as fast as my feet would carry me along the corridor to the Ladies, where I threw up with great violence. I washed my face in cold water, combed my hair, powdered my nose, gave myself a shake and returned.
Vidia looked at me and said, “You did that very well.”
Strongly recommended.
The Flynn effect in reverse does the rot start at the top?
The IQ gains of the 20th century have faltered. Losses in Nordic nations after 1995 average at 6.85 IQ points when projected over thirty years. On Piagetian tests, Britain shows decimation among high scorers on three tests and overall losses on one. The US sustained its historic gain (0.3 points per year) through 2014. The Netherlands shows no change in preschoolers, mild losses at high school, and possible gains by adults. Australia and France offer weak evidence of losses at school and by adults respectively. German speakers show verbal gains and spatial losses among adults. South Korea, a latecomer to industrialization, is gaining at twice the historic US rate.
When a later cohort is compared to an earlier cohort, IQ trends vary dramatically by age. Piagetian trends indicate that a decimation of top scores may be accompanied by gains in cognitive ability below the median. They also reveal the existence of factors that have an atypical impact at high levels of cognitive competence. Scandinavian data from conventional tests confirm the decimation of top scorers but not factors of atypical impact. Piagetian tests may be more sensitive to detecting this phenomenon.
That is newly published research from James R. Flynn and Michael Shayer, via Rolf Degen.
Lessons from the Washington, D.C. dining scene
Contrary to what many people will insist, it’s now possible to eat excellent Mexican food, including tacqueria-style tacos, in D.C., Northern Virginia and nearby Maryland. But this is not the result of a sudden influx of Mexican migrants — long an underrepresented group in the D.C. area — into the dining scene. Rather, earlier Mexican migrants are assimilating, opening larger businesses and spreading quality versions of their food to more parts of this country, just as hamburgers and pizzas earlier transcended their regional origins. This development is consistent with research showing that Mexican-Americans are assimilating more rapidly than previously we had thought. So the next time California, Texas or Arizona snobs complain about Mexican food offerings on the East Coast, tell them it’s better than they think.
The D.C. area also has some stagnating ethnic cuisines. Vietnamese food has continued to penetrate the market in Texas and Oklahoma, but in the Mid-Atlantic region mainstream Vietnamese restaurants seem to be in slight retreat. Vietnamese pho soups and banh mi sandwich shops are popular, and those dishes are feeding into fusion cuisine. But the full-menu restaurants don’t compete well with Thai and Chinese offerings. I am reminded of the Upper East Side of Manhattan, which decades ago had fine and reasonably authentic German restaurants, but now they are mostly gone or are shells of their former selves. In the D.C. area, Bolivian is another cuisine that’s holding steady but not advancing in either the number of restaurants or the popularity with non-Bolivian customers.
The broader lesson is that America isn’t going to become endlessly more diverse, whether in its culinary offerings or otherwise. There are natural limits to these processes, and some are self-reversing as immigrants either assimilate or reach a peak influence on the broader American culture. In dining markets for the last 10 years as a whole, I would say the biggest development has been the spread of high-quality hamburgers and pizzas to all price ranges and dining styles, not the growth of cuisines cooked by recent immigrants.
Here is the rest of the column.